credit sales = $8,000. Beginning and ending accounts receivable = $1,800 and $1,400, respectively. What are collections and the age of accounts receivable, assuming a 360-day year?
A. $7,600 and 36 days.
B. $7,600 and 72 days.
C. $8,000 and 10 days.
D. $8,400 and 36 days.
E. $8,400 and 72 days.
Answer: Option E. $ 8,400 and 72 days
Calculation of collection as follows:
Collection = Total receivables - Ending account receivable
= $9,800 - $1,400
= $8,400
Total receivables = Begining account receivable + credit sales
= $1,800 + $8,000
= $9,800
Calculation of age of accounts receivable as follows:
Age of accounts receivable = (Average Accounts receivable / Credit sales ) * 360 days
= ($1,600 / $8,000) * 360
= 72 days
Average accounts receivable = ( Beginning accounts receivable + Ending accounts receivable ) / 2
= ( $1800 + $1,400 ) / 2
= $ 1,600
Thus, Collection and age of accounts receivable is $8,400 and 72 days ( answer option E)
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