Data from Keniston Corporation's most recent balance sheet and income statement appear below: $$\begin{array} { | l r | r | }
\hline & \text { This Year } & \text { Last Year } \
\hline \text { Accounts receivable } & \$ 128,000 & \$ 114,000 \
\hline \text { Inventory } & \$ 228,000 & \$ 193,000 \
\hline \text { Sales on account } & \$ 813,000 & \
\hline \text { Cost of goods sold } & \$ 597,000 & \
\hline
\end{array}$$ The average collection period for this year is closest to:
A)39.1 days
B)45.1 days
C)54.3 days
D)57.5 days

Question

Data from Keniston Corporation's most recent balance sheet and income statement appear below: $$\begin{array} { | l r | r | } 
\hline & \text { This Year } & \text { Last Year } \
\hline \text { Accounts receivable } & \$ 128,000 & \$ 114,000 \
\hline \text { Inventory } & \$ 228,000 & \$ 193,000 \
\hline \text { Sales on account } & \$ 813,000 & \
\hline \text { Cost of goods sold } & \$ 597,000 & \
\hline
\end{array}$$ The average collection period for this year is closest to:
A)39.1 days
B)45.1 days
C)54.3 days
D)57.5 days

Quizplus · Accepted Answer

The average collection period is calculated as (Average Accounts Receivable / Sales on Account) * 365. The average accounts receivable is ($128,000 + $114,000) / 2 = $121,000. Thus, ($121,000 / $813,000) * 365 ≈ 54.3 days.

Data from Keniston Corporation's Most Recent Balance Sheet and Income