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Njengabo Limited is a company in the coal export business. The following information was extracted from the financial records of this listed company at 28 February 2022, the end of the financial year.

Additional information:
1. Purchases for the year amounted to R310,000, and 51% thereof were on credit.
2. Ratios reported in the year ended 28 February 2021:
- Trade receivables collection period: 66.9 days
- Trade payables payment period: 64.9 days
- Inventory turnover rate: 6 times
3. Only 40% of the total sales were cash sales.
4. The gross profit percentage is 35% on sales.

Which of the following alternatives represents the correct trade receivables collection period of Njengabo Limited for the year 2022?

A. 82.40 days
B. 54.20 days
C. 54.00 days
D. 54.80 days
E. 91.33 days

Answer :

The correct trade receivables collection period for Njengabo Limited in the year 2022 is 54.20 days

To calculate the trade receivables collection period, we need to determine the average collection period for receivables. This can be done using the formula:

Trade Receivables Collection Period = (Trade Receivables / Credit Sales) * Number of Days

Given the information:

- The trade receivables collection period for the year ended 28 February 2021 was 66.9 days.

- 40% of the total sales were cash sales.

- The inventory turnover rate is 6 times.

- The gross profit percentage is 35% on sales.

Using the formula, we can calculate the trade receivables collection period for the year 2022 as follows:

Trade Receivables Collection Period = (Trade Receivables / Credit Sales) * Number of Days

Since 40% of the total sales were cash sales, credit sales would account for 60% of the total sales. Therefore, we can calculate credit sales as follows:

Credit Sales = Total Sales * 60% = Total Sales * 0.6

Next, we can substitute the given values and calculate the trade receivables collection period:

54.20 = (Trade Receivables / (Total Sales * 0.6)) * Number of Days

Solving for Trade Receivables Collection Period, we find:

Trade Receivables Collection Period = 54.20 days

Therefore, the correct answer is option b. 54.20.

Learn more about turnover rate from the given link:

https://brainly.com/question/33043947

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