Rawe Corporation's accounts receivable at the end of Year 2 was $329,000 and its accounts receivable at the end of Year 1 was $280,000.Sales,all on account,amounted to $1,350,000 in Year 2.The company's average collection period for Year 2 is closest to:
A) 1.2 days
B) 1.0 days
C) 82.4 days
D) 89.0 days

Question

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,350,000 ÷ $304,500 = 4.43 (rounded)
*Average accounts receivable =
($329,000 + $280,000) ÷ 2 = $304,500
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 4.43 = 82.4 days (rounded)

Rawe Corporation's Accounts Receivable at the End of Year 2