Question

Knight Roundtable Co. has annual credit sales of $1,080,000 and an average collection period of 32 days in 2018. Assume a 360-day year. What is the company's average accounts receivable balance

Answer 1

If Knight Roundtable Co. has annual credit sales of $1,080,000 and an average collection period of 32 days in 2018. The company's average accounts receivable balance is $96,000.

What is the Average Accounts Receivable?

To find the company's average accounts receivable balance we need to use the formula:

Average Accounts Receivable = (Credit Sales / 360) * Average Collection Period

Average Accounts Receivable = ($1,080,000 / 360) * 32

Average Accounts Receivable = $3,000 * 32

Average Accounts Receivable = $96,000

Therefore the company's average accounts receivable balance is $96,000.