Asset Management Ratios Corn Products Corp. ended the year 2011 with an average collection period of 40 days. The firm's credit sales for 2011 were $9 million. What is the approximate year-end 2011 balance in accounts receivable for Corn Products?
A) $225,000
B) $986,300
C) $4,444,400
D) $360,000,000

Question

Quizplus · Accepted Answer

The average collection period is the average number of days it takes a company to collect its accounts receivable. It is calculated by dividing the average accounts receivable balance by the credit sales for the period. In this case, the average collection period is 40 days and the credit sales for 2011 were $9 million. Therefore, the approximate year-end 2011 balance in accounts receivable for Corn Products is $9 million * 40 days / 365 days = $986,300.