Question

Knight Roundtable Co. has annual credit sales of $1,080,000 and an average collection period of 32 days in 2008. Assume a 360-day year. What is the company’s average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period

Short answer

The average accounts receivables balance is $96,000.

Step-by-step solution

Information provided in the question

Credit sales = $1,080,000

Average collection period = 32 days

Number of days in a year = 360

Calculation of average accounts receivables

The average accounts receivables will be $96,000.

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