Question

Rhodes Company reports the following information for the Year 1 fiscal year: Sales on account$650,000 Accounts receivable$70,000 Allowance for doubtful accounts$4,000 Determine the average number of days it takes Rhodes to collect its accounts receivable. (Round intermediate calculations to 2 decimal places.)

Answer 1

Answer:

37 days

Explanation:

Given:

Credit sales during the year = $650,000

Account receivable = $70,000

Allowance for doubtful accounts = $4,000

Average collection days = ?

Computation of Debtor turn over:

Debtor turn over = Credit sales during the year / (Account receivable - Allowance for doubtful accounts)

Debtor turn over = $650,000 / ($70,000 - $4,000)

Debtor turn over = $650,000 / ($66,000)

Debtor turn over = 9.84848485

Computation of Average collection days:

Average collection days = 365 / Debtor turn over

Average collection days = 365 / 9.84848485

Average collection days = 37.06 = 37 days (Approx)