Question

CornProducts Corp. ended the year 2018 with an average collection period of 40 days. The firm's credit sales for 2018 were $9 million. What is the approximate year-end 2018 balance in accounts receivable for Corn Products?

Answer 1

The approximate year-end 2018 balance in accounts receivable for Corn Products is $986,300

Step-by-step explanation:

For computing the year end balance of accounts receivable, we have to use the formula of average collection period which is shown below:

Average collection period = 365 ÷ average accounts receivable

40 = 365 ÷ average accounts receivable ratio

So, average accounts receivable ratio = 365 ÷ 40 = 9.125

Now, average accounts receivable ratio = Net credit sales ÷ average accounts receivable

9.125 = $9,000,000 ÷ average accounts receivable

So, Average accounts receivable = $9,000,000 ÷ 9.125 = $986,300

Hence, the approximate year-end 2018 balance in accounts receivable for Corn Products is $986,300