Question

Black Guard Security has annual sales of $373,000 and a collection period of 20.74 days. What is the company's average balance in accounts receivable

Answer 1

$21,195

Step-by-step explanation:

With regards to the above, recall that average collections period is accounts receivable divided by average daily sales.

Average collections = Accounts receivable / Average daily sales

Where;

Average sales = Annual Sales / Total number of days in a year

Given that;

Average collections period = 20.74

Accounts receivable = ?

Average daily sales = $373,000 / 365 = 1021.9178082

Therefore, the company's average

balance in accounts receivable would be;

20.74 = Accounts receivable / 1021.9178082

Accounts receivable = 20.74 × 1021.9178082

Accounts receivable = 21194.575342

Accounts receivable = $21,195 approximated.