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Chapter 2: 22BP_e (page 82)

The balance sheet for Stud Clothiers is shown below. Sales for the year were \(2,400,000, with 90 percent of sales sold on credit.

Stud Clothier

Balance sheet 20X1

Assets

Liabilities and Equity

Cash

\)60,000

Account payable

\(220,000

Account receivable

240,000

Accrued taxes

30,000

Inventory

350,000

Bonds payable (long term)

150,000

Plant and equipment

410,000

Common stock

80,000

Paid in capital

200,000

Retained earnings

380,000

Total assets

\)1,060,000

Total LIbilities and Equity

$1,060,000

Compute the following:

e. Average collection period.

Short Answer

Expert verified

Average collection period of the stud clothier company is 40.56 days.

Step by step solution

01

Average receivable turnover ratio

Averagereceivableturnoverratio=NetcreditsalesAverageaccountsreceivable=$2,400,000×90%$240,000=9

02

Calculation of Average collection period

Averagecollectionperiod=365Averagereceivableturnoverratio=3659=40.56

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Most popular questions from this chapter

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