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29 July, 11:53

The financial statements of Daye Manufacturing Company report net sales of $720,000 and accounts receivable of $70,000 and $90,000 at the beginning and end of the year, respectively. What is the average collection period for accounts receivable in days

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  1. 29 July, 11:55
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    Answer: 41 days

    Explanation:

    Given

    Net credit sales 720000

    Accounts receivable opening balance 70000

    Accounts receivable closing balance 90000

    Average accounts receivable = (opening balance + closing balance) / 2

    = (70000+90000)

    =160000/2

    =80000

    Accounts receivable turnover ratio = net sales / average accounts receivable

    =720000/80000

    =9 times

    Average collection period for accounts receivables

    = 365 / accounts receivable turnover ratio

    =365/9

    =40.5

    Average collection period for accounts receivables is 41 days
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