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 $ 560 comma 000. Net credit sales for the year totaled $ 3 comma 600 comma 000. The average collection period of the receivables​ was: (Round any intermediary calculations to two decimal places and your final answer to the nearest​ day.)

Answer 1

Average collection period = 52.21 days

Explanation:

given data

accounts receivable balance = $470,000

accounts balance = $560,000

Net credit sales = $3,600,000

solution

we know that Debtor turnover ratio = Net credit sales ÷ Average receivable ...........1

so here

Average receivable =
`(470000+560000)/(2)`

Average receivable = 515000

so from equation 1

Debtor turnover ratio =
`(3,600,000)/(515000)`

Debtor turnover ratio = 6.990 times

so

Average collection period of the receivables = 365 days ÷ Debtor turnover ratio

Average collection period =
`(365)/(6.990)`

Average collection period = 52.21 days