Question

Sunland Clothing Store had a balance in the Accounts Receivable account of $112000 at the beginning of the year and a balance of $88000 at the end of the year. Net credit sales during the year amounted to $3650000. The average collection period of the receivables in terms of days was

Answer 1

10 days

Step-by-step explanation:

Day's sales in receivables = (365 days × Average receivables) / Net sales

Day's sales in receivables = (365 days × $100,000) / $3,650,000

Day's sales in receivables = 10 days

• Note

Average receivables = (Beginning receivables + Ending receivables) / 2

= ($112,000 + $88,000) / 2

= $100,000

Therefore, the average collection period of the receivables in terms of days was 10days