Question

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?

Answer 1

Answer:

 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