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6 May, 00:23

A firm ended the year with an average collection period of 50 days. The firm's credit sales were $11 million. What is the firm's year-end balance in accounts receivable?

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  1. 6 May, 04:06
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    The approximate year-end 2018 balance in accounts receivable for Corn Products is $1506849.31

    Explanation:

    For computing the year-end balance of accounts receivable, we have to use the formula of the average collection period which is shown below:

    Average collection period = 365 : average accounts receivable

    50 = 365 : average accounts receivable ratio

    So, average accounts receivable ratio = 365 : 50 = 7.3

    Now, average accounts receivable ratio = Net credit sales : average accounts receivable

    7.3 = $11,000,000 : average accounts receivable

    So, Average accounts receivable = $11,000,000 : 7.3 = $1506849.31

    We assume 365 days in a year

    Hence, the approximate year-end 2018 balance in accounts receivable for Corn Products is $1506849.31
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