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Vaughan Company started the year off with an Accounts Receivable balance of $50,000. During the year credit sales were $949,000. Accounts Receivable at the end of year totaled $80,000. What is the average number of days it takes Vaughan Company to collect a receivable? (Do not round your answers in any part of this problem)

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ayokenny2001

Answer:

25 days

Explanation:

To calculate the average number of days, we'll make use of the formula below;

= [(Average receivable / Net credit sales)] × 365

Average receivables = $50,000 + $80,000 / 2 = $65,000

Net credit sales = $949,000

Therefore,

Average collection period

= ($65,000 / $949,000) × 365

= 25 days

It will take Vaughan company 25 days to collect a receivable.

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