Modern Products, Inc. had accounts receivable of $240,000 in 2016, and $300,000 in 2017. Net...

Question:

Modern Products, Inc. had accounts receivable of {eq}\$240,000 {/eq} in 2016, and {eq}\$300,000 {/eq} in 2017. Net sales for 2017 were {eq}\$3,000,000 {/eq}, and gross profit margin was {eq}\$1,200,000 {/eq}. The average collection period for 2017 was {eq}\rule{1cm}{0.15mm} {/eq}.

Average collection Period:

Average collection Period is a measure of how the company is efficient is collecting its accounts receivables. The shorter the collection period, the better. Average collection period is the ratio of the total days in a year over the accounts receivable turnover. This is the number of days covered from the time accounts receivables are granted to customers and the time it will be collected.

Answer and Explanation: 1

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To compute for the accounts receivables turnover:

Accounts Receivables-2016240,000
Accounts Receivables-2017300,000
Total540,000
Divided by: 2
Avera...

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Average Collection Period: Formula & Analysis

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Chapter 1 / Lesson 9
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Understand the definition of the average collection period in accounting, discover the formula for calculating the average collection period, and see some calculation examples.


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