Answer:
The Huckabee's 2018 average collection period (rounded) is 5 times
Explanation:
To find out the average collection period for Huckabee's 2018, we have to use the formula of the average collection period which is presented below:
Average collection period = Net credit sales ÷ Average accounts receivable
where,
Net credit sale is $400,000
And, the average accounts receivable is calculated by applying the equation which is shown below:
= (2017 accounts receivable + 2018 accounts receivable) ÷ 2
= ( $72,000 + $80,000 ) ÷ 2
= $76,000
Now apply the above values to the formula
So, the answer would be equal to
= $400,000 ÷ $76,000
= 5.26 times
The other things like opening balance of merchandise inventory and cost of goods and the ending balance of merchandise inventory and cost of goods is irrelevant. Thus, it is not to be considered.
Hence, Huckabee's 2018 average collection period (rounded) is 5 times
