Financial statements for Maraby Corporation appear below:

-Maraby Corporation's average collection period for Year 2 was closest to:
A) 38.6 days
B) 46.6 days
C) 32.6 days
D) 27.0 days

Question

Financial statements for Maraby Corporation appear below:
  
-Maraby Corporation's average collection period for Year 2 was closest to:
A) 38.6 days 
B) 46.6 days 
C) 32.6 days 
D) 27.0 days

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $1,960 ÷ $175* = 11.2 (rounded)
*Average accounts receivable balance = ($190 + $160) ÷ 2 = $175
Average collection period = 365 days ÷ Accounts receivable turnover (see above)
= 365 days ÷ 11.2 = 32.6 days (rounded)

Financial Statements for Maraby Corporation Appear Below