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Garham Company had $360,000 in sales on account last year. The beginning accounts receivable balance was...

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Accounting

Garham Company had $360,000 in sales on account last year. Thebeginning accounts receivable balance was $20,000 and the endingaccounts receivable balance was $36,000. The company's averagecollection period (age of receivables) was closest to:

20.28 days.

28.39 days.

36.50 days.

56.78 days.

Answer & Explanation Solved by verified expert
4.3 Ratings (543 Votes)

Average Collection Period = Average Account Receivable / (Credit Sales / 365)
Average Account receivable
Opening Account receivable = $                     20,000
Add: Closing Account receivable $                     36,000
Average Account receivable (A) $                     28,000
Crdit Sales / 365 = $ 360,000 / 365 Days = (B) $                     986.30
Average Collection Period =($ 28,000 / $ 986.30 ) A/B =                           28.39
Answer = Option 2 = 28.39 Days

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