Question:
In Problem 1, if accounts receivable change to $140,000, while credit sales are $1,440,000, should we assume the firm has a more or a less lenient credit policy?
Problem 1: Barney’s Antique Shop has annual credit sales of $1,080,000 and an average collection period of 40 days. Assume a 360-day year. What is the company’s average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period.