The accounting records of the Harris and Schubert Companies contained the follow

Question

The accounting records of the Harris and Schubert Companies contained the following account balances:

Sales Accounts receivable

Harris $ 300,000 $ 60,000

Schubert 180,000 40,000

Select the true statement from the following options:

a. Schubert Company is likely to incur less credit costs than Harris Company.

b. The company with the higher turnover ratio will also have the longer average number of days to collect accounts receivable.

c. The accounts receivable for Schubert Company turns over 6 times each year.

d. The average number of days to collect accounts receivable for Harris is 73 days.

Explanation / Answer

Answer is:

d. The average number of days to collect accounts receivable for Harris is 73 days.

Explanation:

Accounts receivable turnover for Harris = Net sales/Accounts receivable = 300000/60000 = 5 times

The average number of days to collect accounts receivable for Harris = 365/5 = 73 days

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