Riordan Trucking has sales of $18M and an accounts receivable balance of $1M. The firm has projected next year's sales at $24M and wants to reduce ACP by 2 days. Calculate Riordan's projected accounts receivable balance. (Round to the nearest $ and assume 360 days.)

Question

Quizplus · Accepted Answer

The current Average Collection Period (ACP) is calculated as (Accounts Receivable / Sales) * 360 = ($1M / $18M) * 360 = 20 days. To reduce ACP by 2 days, the new ACP will be 18 days. The projected accounts receivable balance is calculated as (New ACP / 360) * Projected Sales = (18 / 360) * $24M = $1.2M.

Riordan Trucking Has Sales of $18M and an Accounts Receivable