Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The average collection period for Year 2 is closest to:

Question

Data from Dunshee Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The average collection period for Year 2 is closest to:

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $1,170 ÷ $280* = 4.18 (rounded)
*Average accounts receivable balance = ($270 + $290)÷ 2 = $280
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 4.18 = 87.3 days (rounded)

Data from Dunshee Corporation's Most Recent Balance Sheet Appear Below