Question

The following financial information is for Annapolis Corporation are for the fiscal years ending 2019 & 2018 (all balances are normal): Item/Account 2019 2018 Accounts Receivable $44,000 $36,000 Inventory 42,000 38,000 Net Sales (all credit) 300,000 350,000 Cost of Goods Sold 154,000 152,000 Net Income 27,200 24,800 Use this information to determine the accounts receivable average collection period for FY 2019. (Use 365 day year. Round your answers to one decimal place.)

Answer 1

Answer)

Calculation of account receivable average collection period for FY19

Account receivable average collection period = (Average account receivable/ Net Credit Sales) X 365 days

                                                                                        = ($ 40,000/ $ 300,000) X 365 days

                                                                                         = 48.7 days

Therefore average receivable collection period is 48.7 days.

Working Note:

Calculation of average account receivable = (Ending balance of account receivable in FY18 + Ending balance of account receivable in FY19)/ 2

                                                                                     = ($ 36,000 + $ 44,000)/ 2

                                                                                     = $ 40,000