Question

In: Finance

By the year Ending 12/31/2019, ABC Corporation's Balance Sheet & Income Statements show the following details...

By the year Ending 12/31/2019, ABC Corporation's Balance Sheet & Income Statements show the following details

1. Net Credit Sales = $ 450,000

2. Account Receivable = $ 50,000

This means on Avg the Collection Period (ACP) is about =   

50 days

30 days

45 Days

28 days

Solutions

Expert Solution

Option (c) is correct

Formula for Average collection period is:

Average collection period = 365 * Accounts receivable / Net credit sales

Putting the given values in the above formula, we get,

Average collection period = 365 * $50000 / $450000

Average collection period = 41 days

Nearest answer from the options given is 45 days. But exact Average collectiion period is 41 days.

jeff jeffy answered 2 years ago
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