Question

Marie's Clothing Store had an accounts receivable balance of $ 470 comma 000 at the beginning of the year and a yearminusend balance of $ 630 comma 000. Net credit sales for the year totaled $ 3 comma 400 comma 000. The average collection period of the receivables​ was:

Answer 1

Answer: 59 days

Explanation: As we know that,  

$Average\:collection\:period=\frac{365\:days}{Debtor\:turnover\:ratio}$

And,

$Debtor\:turnover\:ratio= \frac{net\:credit\:sales}{average\:debtors}$

where,

$average\:debtors\:=\frac{470,000+630,000}{2}$

                            = $550,000

so,

$Debtor\:turnover\:ratio= \frac{3,400,000}{550,000}$

                                        =6.19

Now, putting the values into first formula we have :-

$Average\:collection\:period=\frac{365\:days}{6.19}$

                                                =  59 days

Answer 2

Answer:

The average collection period of the receivables​ was 59 days.

Explanation:

We have the formula for Average collection period of the receivables in days as below:

Average collection period of the receivables in days = 365 / Account receivable turnover ratio = 365 / ( Net credit sales / Average account receivable balance);

in which:

Average account receivable balance = (470,000 + 630,000) / 2 = $550,000;

Net credit sales is given at $3,400,000;

So, Average collection period of the receivables in days = 365 / (3,400,000 / 550,000) = 59 days.