Given an accounts receivable turnover of 10 and annual credi

Given an accounts receivable turnover of 10 and annual credit sales of $900,000, the average collection period is

A.36.50 days.

B.40.56 days.

C.18.25 days.

D.90 days.

Solution

Turnover ratio = year days / average collection period

Therefore average period = days / ratio

=365 / 10 = 36.5 days average.

And for bonus points the amount = Total sales / ratio

= 362,000 / 10 = 36,200

Answer (A)