Question

Marie's Clothing Store had an accounts receivable balance of $ 470 comma 000 at the beginning of the year and a yearminusend balance of $ 630 comma 000. Net credit sales for the year totaled $ 3 comma 400 comma 000. The average collection period of the receivables​ was:

Answer 1

The average collection period of the receivables​ was 59 days.

Step-by-step explanation:

We have the formula for Average collection period of the receivables in days as below:

Average collection period of the receivables in days = 365 / Account receivable turnover ratio = 365 / ( Net credit sales / Average account receivable balance);

in which:

Average account receivable balance = (470,000 + 630,000) / 2 = $550,000;

Net credit sales is given at $3,400,000;

So, Average collection period of the receivables in days = 365 / (3,400,000 / 550,000) = 59 days.

Answer 2

Answer: 59 days

Explanation: As we know that,

`Average\:collection\:period=(365\:days)/(Debtor\:turnover\:ratio)`

And,

`Debtor\:turnover\:ratio= (net\:credit\:sales)/(average\:debtors)`

where,

`average\:debtors\:=(470,000+630,000)/(2)`

= $550,000

so,

`Debtor\:turnover\:ratio= (3,400,000)/(550,000)`

=6.19

Now, putting the values into first formula we have :-

`Average\:collection\:period=(365\:days)/(6.19)`

= 59 days