Question

Maddox Resources has credit sales of $180,000 yearly with credit terms of net 30 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its customers take the full 30 days to pay. (Use 365 days in a year.)

What is the average receivables balance? (Do not round intermediate calculations. Round the final answer to nearest whole dollar.)

Answer 1

The average receivables balance for Maddox Resources is approximately $14,795, calculated based on annual credit sales of $180,000, with no discounts for early payment and a 30-day average collection period.

Step-by-step explanation:

The average receivables balance for Maddox Resources can be calculated by dividing the annual credit sales by the number of days in a year and then multiplying by the average collection period. To get the average receivables balance, we use the formula:

Average Receivables Balance = (Credit Sales / Days in Year) * Average Collection Period

In this case, the credit sales are $180,000, the days in the year are 365, and the average collection period is 30 days.

Plugging in the values into the formula, we get:

Average Receivables Balance = ($180,000 / 365) * 30
= Average Receivables Balance = $14,794.52

The average receivables balance would be approximately $14,795 when rounding to the nearest whole dollar.