Question

mariota's has annual sales of $556,400 and cost of goods sold of $361,660. the beginning accounts receivable was $45,400 and the ending receivables is $52,300. how many days on average does it take the company to collect its accounts receivable? assume 365 days per year.

Answer 1

On average, it takes Mariota's approximately 32 days to collect its accounts receivable. This is calculated using the average accounts receivable over the given period and the net credit sales for the year.

Step-by-step explanation:

To calculate the average collection period for Mariota's accounts receivable, we use the formula:

Average Collection Period = (Average Accounts Receivable / Net Credit Sales) × 365 days

First, we compute the Average Accounts Receivable:

Average Accounts Receivable = (Beginning Receivables + Ending Receivables) / 2
= ($45,400 + $52,300) / 2
= $48,850

Net Credit Sales are equal to annual sales, as we do not have information regarding cash sales. So, Net Credit Sales = $556,400.

Now, using the formula:

Average Collection Period = ($48,850 / $556,400) × 365 days
= 32.04 days

Therefore, on average, it takes Mariota's approximately 32 days to collect its accounts receivable.