ACCA AA · Chapter 6 · Question 10 of 11
Draft financial statements of Rivet Co show credit revenue of $10,950,000. Trade receivables were $1,200,000 at the start of the year and $1,500,000 at the year end. Based on year-end receivables and a 365-day year, what is the trade receivables collection period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 50 days
Explanation
Collection period = closing receivables / credit revenue x 365 = $1,500,000 / $10,950,000 x 365 = 50 days. Using opening receivables gives 40 days and average receivables ($1,350,000) gives 45 days. The figure 7.3 is receivables turnover (10,950 / 1,500), expressed in times, not days.
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