Guttery Corporation has provided the following financial data from its balance sheet: Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000. The company's average collection period (age of receivables)for Year 2 is closest to:

Question

Guttery Corporation has provided the following financial data from its balance sheet:  Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000. The company's average collection period (age of receivables)for Year 2 is closest to:

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,450,000 ÷ $111,000 = 13.06 (rounded)
*Average accounts receivable =
($112,000 + $110,000)÷ 2 = $111,000
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 13.06 = 27.9 days (rounded)

Guttery Corporation Has Provided the Following Financial Data from Its