A firm has sales of $2.6 million, and 25 percent of the sales are for cash....
A firm has sales of $2.6 million, and 25 percent of the sales
are for cash. The year-end accounts receivable balance is
$195,000.
What is the average collection period?
Homework Answers
Total Sales = $2,600,000
Cash Sales = 25% * Total Sales
Cash Sales = 25% * $2,600,000
Cash Sales = $650,000
Credit Sales = Total Sales - Cash Sales
Credit Sales = $2,600,000 - $650,000
Credit Sales = $1,950,000
Average Collection Period = 360 * Accounts Receivable / Credit
Sales
Average Collection Period = 360 * $195,000 / $1,950,000
Average Collection Period = 36 days
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