Question

Mervyn's fine fashion has an average collection period of 50 days. The accounts receivable balance is $87,500. What is the value of credit sales? (Use 365 days in a year. Round the final answer to the nearest whole dollar.)

Answer 1

To find the value of credit sales, divide the accounts receivable balance by the average collection period and multiply by 365 days. The value of credit sales for Mervyn's fine fashion is $638,750.

Step-by-step explanation:

To find the value of credit sales, we need to use the formula: Average Collection Period = (Accounts Receivable / Credit Sales) * 365. We know that the average collection period is 50 days and the accounts receivable balance is $87,500. Rearranging the formula, we have: Credit Sales = (Accounts Receivable / Average Collection Period) * 365.

Plugging in the values, we get: Credit Sales = ($87,500 / 50) * 365 = $638,750.

The value of credit sales for Mervyn's fine fashion is $638,750.