Data from Concepcion Corporation's most recent balance sheet and income statement appear below: $$\begin{array} { l r r }
& \text { This Year } & \text { Last Year } \
\text { Accounts receivable......... } & \$ 120,000 & \$ 118,000 \
\text { Inventory ..................... } & \$ 193,000 & \$ 183,000 \
\text { Sales on account ............ } & \$ 800,000 & \
\text { Cost of goods sold ........... } & \$ 512,000 &
\end{array}$$ The average collection period for this year is closest to:
A)54.3 days
B)7.4 days
C)7.2 days
D)54.7 days

Question

Data from Concepcion Corporation's most recent balance sheet and income statement appear below: $$\begin{array} { l r r } 
& \text { This Year } & \text { Last Year } \
\text { Accounts receivable......... } & \$ 120,000 & \$ 118,000 \
\text { Inventory ..................... } & \$ 193,000 & \$ 183,000 \
\text { Sales on account ............ } & \$ 800,000 & \
\text { Cost of goods sold ........... } & \$ 512,000 &
\end{array}$$ The average collection period for this year is closest to:
A)54.3 days
B)7.4 days
C)7.2 days
D)54.7 days

Quizplus · Accepted Answer

The average collection period is calculated as (Average Accounts Receivable / Sales on Account) * 365. The average accounts receivable is ($120,000 + $118,000) / 2 = $119,000. Thus, the average collection period is ($119,000 / $800,000) * 365 ≈ 54.3 days.

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