Asset Management Ratios CornProducts Corp.ended the year 2013 with an average collection period of 40 days.The firm's credit sales for 2011 were $9 million.What is the approximate year-end 2013 balance in accounts receivable for Corn Products?
A)$225,000
B)$986,300
C)$4,444,400
D)$360,000,000

Question

Quizplus · Accepted Answer

The average collection period is 40 days, which means that on average, it takes 40 days for Corn Products to collect its receivables. The credit sales for 2011 were $9 million, which means that the average daily credit sales were $9 million / 365 days = $24,657.53. Therefore, the approximate year-end 2013 balance in accounts receivable is $24,657.53 * 40 days = $986,301.12.