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The total annual sales for Herman's Hardware Store was $1,246,135 and the total accounts receivable was $41,728. What was the average collection period to the nearestwhole day?12 days14 days18 days24 daysNone of these choices are correct.

Sagot :

The average collection Period formula is

[tex]\text{Average collection period=}\frac{Account\text{ receivable}}{\frac{Annual\text{ sales}}{365}}[/tex][tex]\begin{gathered} \text{Annual sales=\$1,246,135} \\ \text{Account receivable =\$41,728} \end{gathered}[/tex]

Substitute the values above in the average collection period

[tex]\begin{gathered} \text{Average collection period =}\frac{41728}{\frac{1246135}{365}} \\ =\frac{41728}{3414.06} \\ =12.222 \\ \approx12days \end{gathered}[/tex]

Hence the average collection period to the nearest whole day is 12 days

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