Mr. Husker’s Tuxedos Corp. ended the year 2015 with an average collection period

Question

Mr. Husker’s Tuxedos Corp. ended the year 2015 with an average collection period of 39 days. The firm’s credit sales for 2015 were $56.8 million.

What is the year-end 2015 balance in accounts receivable for Mr. Husker’s Tuxedos? (Enter your answer in dollars, not millions. Round your answer to the nearest whole dollar. Use 365 days a year.)

What is the year-end 2015 balance in accounts receivable for Mr. Husker’s Tuxedos? (Enter your answer in dollars, not millions. Round your answer to the nearest whole dollar. Use 365 days a year.)

Explanation / Answer

Average Collection Period = (Days x Account Receivables) / Credit Sales

Where:
Days = Total amount of days in period = 365 (1 year)
AR = Average amount of accounts receivables (Needs to be calculated)
Credit Sales = Total amount of net credit sales during period = $56,800,000

39 = (365 x AR) / $56,800,000
(365 x AR) = 39 x $56,800,000
AR = (39 x $56,800,000) / 365
AR = $6,069,041

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