Calculate the Average Collection Period for Dots Inc

question 72

Multiple Choice

Calculate the average collection period for Dots Inc.if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?

• A) 60 days
• B) 61 days
• C) 67 days
• D) 73 days

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Definitions:

NSF Check

A check that has not been honored by the bank due to insufficient funds in the account to cover the amount.

Outstanding Checks

Checks that have been written and recorded in a company’s ledger but have not yet been cleared or deducted from the bank account balance.

Credit Memo

A document issued by a seller to a buyer, reducing the amount owed by the buyer under certain circumstances, such as returned goods or an overcharge.

Debit Memo

A document issued by a seller of goods or services to a buyer, reducing the amount the buyer owes under the original invoice.