Question

Average collection cycle. Use the following account information to find the average collection cycle for Rian Company.

2013 and 2014 Selected Balance Sheet Accounts of Rian Company
	​12/31/14	​12/31/13	Change
Accounts receivable	​$44,516	​$53,651	​$9,135
Inventory	​$64,869	​$69,813	​$4,944
Accounts payable	​$31,668	​$29,603	​$2,065

2014 Selected Income Statement Items for Rian Company
Cash sales	​$547,000
Credit sales	​$591,000
Total sales	​$1,138,000
Cost of goods sold	​$608,610

What is the average collection cycle for Rian​ Company? ________ days ​(Round to one decimal​ place.)

Answer 1

first we need to know the accounts receivable turnover

=> credit sales/ average accounts receivable

=>$591,000 / (44,516+53,651)/2

=>$591,000/49,083.50

=>12.0407061.

now,

average collection cycle = 365 days / accounts receivable turnover

=>365 / 12.0407061

=>30.3 days.