116k views
5 votes
Net credit sales for Turner Company are $200,000 for the year and the average accounts receivable balance is $20,000. What is the company's average collection period?

A) 5 days
B) 548 days
C) 54.8 days
D) 36.5 days

User Samisa
by
7.3k points

1 Answer

5 votes

Final answer:

The average collection period for Turner Company, with net credit sales of $200,000 and an average accounts receivable balance of $20,000, is calculated to be 36.5 days.

Step-by-step explanation:

The company's average collection period can be determined using the formula for the average collection period, which is:

Average Collection Period = (Average Accounts Receivable / Net Credit Sales) × Days in the Period

In the case of Turner Company, the average accounts receivable balance is $20,000 and the net credit sales are $200,000. Assuming 'Days in the Period' refers to a year (365 days), the calculation would be:

Average Collection Period = ($20,000 / $200,000) × 365 = 0.1 × 365 = 36.5 days

Therefore, the correct answer is D) 36.5 days. This means on average, it takes the Turner Company 36.5 days to collect its receivables.

User Kinglink
by
7.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.