Answer (C) is correct . A firm’s average gross receivables balance can be calculated by multiplying average daily sales by the average collection period (days’ sales outstanding). Alternatively, annual credit sales can be divided by the accounts-receivable turnover (net credit sales ÷ average accounts receivable) to obtain the average balance in receivables.
Answer (A) is incorrect because Alternative I cannot be correct. Neither of the multiplicands is a dollar figure, so the product could not be the dollar balance of receivables.
Answer (B) is incorrect because Alternative I cannot be correct. Neither of the multiplicands is a dollar figure, so the product could not be the dollar balance of receivables.
Answer (D) is incorrect because Alternative III cannot be correct. It contains average gross receivables, the amount being calculated.
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