Excerpts from Zorra Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850.
-The average collection period for Year 2 is closest to:
A)57.3 days
B)53.3 days
C)0.9 days
D)1.2 days

Question

Excerpts from Zorra Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850.
-The average collection period for Year 2 is closest to:
A)57.3 days 
B)53.3 days 
C)0.9 days 
D)1.2 days

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account F1F1F1S1F1F1F10 Average accounts receivable balance
= $1,370 F1F1F1S1F1F1F10 $215* = 6.37
*Average accounts receivable balance = ($200 + $230)F1F1F1S1F1F1F10 2 = $215
Average collection period = 365 days F1F1F1S1F1F1F10 Accounts receivable turnover
= 365 days F1F1F1S1F1F1F10 6.37 = 57.3 days

Excerpts from Zorra Corporation's Most Recent Balance Sheet Appear Below