US CMA Part 2 · Chapter 1 · Question 7 of 15
Ellison Fabrics had credit sales of $2,190,000 for the year. Accounts receivable were $168,000 at the beginning of the year and $192,000 at the end. Using average receivables and a 365-day year, what is the average collection period (days sales outstanding)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 30.0 days
Explanation
Average receivables = ($168,000 + $192,000) / 2 = $180,000. Receivables turnover = $2,190,000 / $180,000 = 12.17 times. Days sales outstanding = 365 / 12.1667 = 30.0 days (rounded to one decimal). Using only ending receivables gives 32.0 days, and 12.2 is the turnover ratio, not a number of days.
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