Sales revenue (75% on credit) $ 360,000 Expenses (26% on credit) 66,000 Accounts

Question

Sales revenue (75% on credit) $ 360,000 Expenses (26% on credit) 66,000 Accounts receivable, net at December 31, 2010 (a decrease
of $7,000 during 2010) 11,000 Total assets 260,000 Stockholders' equity 150,000 What was the average number of days to collect receivables during 2010? (Do not round your intermediate calculations. Use 365 days a year.) 35.95. 19.60. 11.15. 14.70.

35.95. 19.60. 11.15. 14.70.

Sales revenue (75% on credit) $ 360,000 Expenses (26% on credit) 66,000 Accounts receivable, net at December 31, 2010 (a decrease
of $7,000 during 2010) 11,000 Total assets 260,000 Stockholders' equity 150,000

Explanation / Answer

Hi,

Please find the answer as follows:

Average Collection Period = 365/Accounts Receivables Turnover Ratio

Accounts Receivables Turnover Ratio = Credit Sales/(Average Accounts Recievables)

Credit Sales = 360000*.75 = 270000

Average Accounts Receivables = (11000 + 18000)/2 = 14500

Accounts Receivables Turnover Ratio = 270000/14500 = 18.62

Average Collection Period = 365/18.62 = 19.60

Option B (19.60) is correct.

Thanks.

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