Question

ABC Clinic has a "days in patient accounts receivable" (average collection period) of 90 days for its accounts receivable. If net patient service revenue for the year were $5,840,000,000, what is the balance in accounts receivable at year-end? Assume a 365-day calendar year.

a)$1,500,200
b)$1,440,000
c)$1,360.000
d)None of the above

Answer 1

To calculate the balance in accounts receivable at year-end, divide the net patient service revenue for the year by the number of days in the year. Multiply the average daily net patient service revenue by the average collection period to determine the balance in accounts receivable. The balance in accounts receivable at year-end is approximately $1,500,200.

Step-by-step explanation:

To calculate the balance in accounts receivable at year-end, we need to determine the average daily net patient service revenue. We can do this by dividing the net patient service revenue for the year by the number of days in the year (365).

Net Patient Service Revenue per day = Net Patient Service Revenue / Number of Days

Balance in Accounts Receivable = Average Daily Net Patient Service Revenue * Average Collection Period (90 days)

Balance in Accounts Receivable = (Net Patient Service Revenue / Number of Days) * Average Collection Period

Using the given information, the balance in accounts receivable at year-end would be approximately $1,500,200 (Option a).