Final answer:
The average collection period for Marigold Shop's receivables is calculated by dividing the average accounts receivable balance by the average daily credit sales, yielding approximately 20.0 days.option B is correct answer.
Step-by-step explanation:
The question revolves around the calculation of the average collection period for the receivables for Marigold Shop. The average collection period is a critical business metric that indicates the average number of days it takes for a company to receive payment after a sale on credit. This financial indicator is important because it helps the business understand its cash flow situation and manage its credit policies more effectively.
To calculate the average collection period, we need to divide the average accounts receivable balance by the average daily credit sales. First, we calculate the average accounts receivable by adding the beginning balance to the ending balance and dividing by two, which gives us a figure of \( (\$759,000 + \$969,000) \div 2 = \$864,000 \).
Then we calculate the average daily credit sales by dividing the net credit sales by the number of days in the year (assuming 365 days), which gives us \( \$15768000 \div 365 \approx \$43,232.88 \) per day. Finally, the average collection period is computed by dividing the average accounts receivable by the average daily credit sales, yielding \( \$864,000 \div \$43,232.88 \approx 19.98 \) days, which rounds to 20.0 days, corresponding to option B.