Question

The financial statements of Danielle Manufacturing Company report net sales of $600,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively. What is the average collection period for accounts receivable in days

Answer 1

Answer:

45.63 days.

Explanation:

The average collection period is the time measured in days that the company have to wait until all of its accounts receivable have been perceived. If the have sold 600,000 dollars between the beginning and the end of the year, and they have an average of 75,000 in accounts receivable ((60,000+90,000)/2), that means the accounts receivable accumulate 45.63 days of sales (75,000*365/600,000), or that they have to wait 45.63 days until they collect all the credits.