Data from Dalpiaz Corporation's most recent balance sheet and income statement appear below: This YearLast YearAccounts receivable, net$104,000 $114,000 Inventory$157,000 $165,000 Sales on account$647,000 Cost of goods sold$438,000 Required:Compute the average collection period for this year:
What will be an ideal response?
Average collection period = 365 days ÷ Accounts receivable turnover*
= 365 days ÷ 5.94 = 61.4 days
*Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance**
= $647,000 ÷ $109,000 = 5.94
**Average accounts receivable= ($104,000 + $114,000) ÷ 2 = $109,000
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