Dahn Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at the end of Year 2 was $2.37 per share.
-The company's average collection period for Year 2 is closest to:
A) 35.7 days
B) 1.1 days
C) 1.0 days
D) 35.2 days

Question

Dahn Corporation has provided the following financial data:
   Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at the end of Year 2 was $2.37 per share.
-The company's average collection period for Year 2 is closest to:
A) 35.7 days 
B) 1.1 days 
C) 1.0 days 
D) 35.2 days

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,370,000 ÷ $132,000 = 10.38 (rounded)
*Average accounts receivable =
($134,000 + $130,000) ÷ 2 = $132,000
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 10.38 = 35.2 days (rounded)

Dahn Corporation Has Provided the Following Financial Data