Question

The financial statements of Daye Manufacturing Company report net sales of $720,000 and accounts receivable of $70,000 and $90,000 at the beginning and end of the year, respectively. What is the average collection period for accounts receivable in days

Answer 1

Answer: 41 days

Explanation:

Given

Net credit sales 720000

Accounts receivable opening balance 70000

Accounts receivable closing balance 90000

Average accounts receivable = (opening balance + closing balance) / 2

=(70000+90000)

=160000/2

=80000

Accounts receivable turnover ratio = net sales/ average accounts receivable

=720000/80000

=9 times

Average collection period for accounts receivables

= 365/ accounts receivable turnover ratio

=365/9

=40.5

Average collection period for accounts receivables is 41 days