Piper, Inc. had net sales of $2,700,000 during 2016. On January 1, 2016, Piper’s accounts receivable...
Piper, Inc. had net sales of $2,700,000 during 2016. On January 1, 2016, Piper’s accounts receivable were $640,000. On December 31, 2016, Piper’s accounts receivable were $800,000.
What was Piper’s average collection period for 2016? Please provide calculations so I can learn, thank you!
Select one: A. 108.1 days B. 15.5 days C. 48.7 days D. 97.3 days
Homework Answers
Average collection period is determined as follows: 365 days in a year divided by accounts receivable ratio.
Accounts receivable ratio= Net sales/(average accounts receivable during the period)
Therefore, in the above question, first determine the accounts receivable ratio=$2,700,000/(($640,000+$800,000)/2)
=3.75 times
therefore, average collection period=365/3.75=97 days
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