A company has trade receivables of $82,000. Annual sales are $800,000, of which $730,000 are on credit and $70,000 are for cash. What is the trade receivables collection period (using a 365-day year)?

Correct answer: D) 41 days

Explanation

Receivables collection period = (trade receivables / credit sales) x 365 = ($82,000 / $730,000) x 365 = 41 days. Only credit sales create receivables: using total sales gives 37.4 days, a 360-day year gives 40.4 days, and both errors together give 36.9 days.