Question

If a firm averages $2,000 in daily credit sales and offers 60-day terms, the average accounts receivable balance will be $120,000.

a. True
b. False

Answer 1

a. True

Step-by-step explanation:

The computation of the average accounts receivable balance is shown below:

= Daily credit sales × day terms

= $2,000 × 60 days terms

= $120,000

We simply multiplied the average amount with the day term so that the average account receivable balance could come

Hence, the given statement is true

Therefore the correct option is a.