Excerpts from Sydner Corporation's most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
-The average collection period for Year 2 is closest to:
A) 55.1 days
B) 0.9 days
C) 1.1 days
D) 57.8 days

Question

Excerpts from Sydner Corporation's most recent balance sheet appear below:
  Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900.
-The average collection period for Year 2 is closest to:
A) 55.1 days 
B) 0.9 days 
C) 1.1 days 
D) 57.8 days

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $1,390 ÷ $220* = 6.32 (rounded)
*Average accounts receivable balance = ($210 + $230) ÷ 2 = $220
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 6.32 = 57.8 days (rounded)

Excerpts from Sydner Corporation's Most Recent Balance Sheet Appear Below