A general contractor has accounts receivable of $125,000 with the following aging: 0-30 days ($75,000), 31-60 days ($30,000), 61-90 days ($15,000), and over 90 days ($5,000). What percentage of total receivables is considered current (0-30 days)?
Correct Answer
A) 60%
Current receivables are $75,000 out of total receivables of $125,000. $75,000 ÷ $125,000 = 0.60 or 60%.
Why This Is the Correct Answer
Current receivables are defined as accounts receivable aged 0-30 days, which equals $75,000 in this scenario. To find the percentage, we divide the current receivables by total receivables: $75,000 ÷ $125,000 = 0.60 or 60%. This represents the portion of money owed that is still within normal payment terms and considered most collectible.
Why the Other Options Are Wrong
Option C: 85%
85% would result from incorrectly calculating $106,250 ÷ $125,000, which suggests mathematical errors in either the numerator or denominator calculations.
Option D: 75%
75% would result from incorrectly calculating $75,000 ÷ $100,000, which suggests using the wrong denominator or misreading the total receivables amount.
Memory Technique
Remember 'Current = 0-30' and use the fraction format: Current/Total = Answer. Write it as a fraction first ($75K/$125K = 3/5 = 60%) to avoid decimal errors.
Reference Hint
Business and Finance chapter covering accounts receivable aging and cash flow analysis
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