If Challenge Corporation has sales of $2 million per year (all credit) and an average collection period of 35 days, what is its average amount of accounts receivable?
A) $191,781
B) $57,143
C) $5,556
D) $97,222

Question

Quizplus · Accepted Answer

The average amount of accounts receivable can be calculated by dividing the annual sales by 365 days to find the daily sales and then multiplying by the average collection period. For Challenge Corporation, this is ($2,000,000 / 365) * 35 = $191,780.82, which rounds to $191,781.

If Challenge Corporation Has Sales of $2 Million Per Year