Question

Granger Corporation had $184,000 in sales on account last year. The beginning accounts receivable balance was $14,000 and the ending accounts receivable balance was $23,000. The corporation's average collection period was closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:  Average collection period = 36.69 Days

Explanation:

Given that,

Beginning accounts receivable balance = $14,000

Last year sales = $184,000

Ending accounts receivable balance = $23,000

Therefore,

Average accounts receivable:

= $\frac{Accounts\ receivables\ in\ beginning + Accounts\ receivables\ in\ Ending}{2}$

=  $\frac{14000 + 23,000}{2}$

= $18,500

Here we are assuming 365 days in a year.

Average collection period = $\frac{365\timesAverage\ accounts\ receivable}{Net\ sales}$

                                         = $\frac{365\times18,500}{184,000}$

                                         = 36.69

∴ Average collection period = 36.69 Days