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15 April, 03:29

The 2013 income statements of Leggett & Platt, Inc. reports net sales of $3,746.0 million. The balance sheet reports accounts receivable, gross of $482.6 million at December 31, 2013 and $465.4 million at December 31, 2012. The average collection period in 2013 was Select one: a. 46 days b. 10 days c. 47 days d. 8 days e. None of the above

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Answers (2)
  1. 15 April, 04:18
    0
    The correct option is A, 46 days

    Explanation:

    Average collection period=365 days/average receivables turnover ratio

    Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts

    Receivable

    Net credit sales is $3,746.0 million

    Average receivables=$482.6 million+$465.4 million=$474 million

    Accounts receivables turnover ratio=$3,746.0 million/$474 million

    =7.90

    Average collection period=365/7.90

    =46.20 days

    When is rounded to a whole number it becomes 46 days, no doubt option A is the correct option.
  2. 15 April, 04:53
    0
    The answer is a. 46 days.

    Explanation:

    The average collection period is the time it takes on average to receive the cash from the credit sales. It is the time period for which an average accounts receivable pays the company. The formula for average collection period is,

    Average collection period = (Average accounts receivable / Net sales) * 365

    Where 365 is taken as the number of days in a year.

    The average of accounts receivables can be calculated by adding the opening and closing accounts receivables and dividing them by 2.

    Average accounts receivables = (465.4 + 482.6) / 2 = 474 million

    Average collection period = (474 / 3746) * 365 = 46.185 days rounded off to 46 days.
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