A general contractor has accounts receivable of $85,000 with the following aging: 0-30 days ($45,000), 31-60 days ($25,000), 61-90 days ($10,000), and over 90 days ($5,000). What percentage of total receivables is considered current (0-30 days)?
Correct Answer
C) 53%
Current receivables are $45,000 out of total receivables of $85,000. $45,000 ÷ $85,000 = 0.529 or approximately 53%.
Why This Is the Correct Answer
Current receivables are defined as accounts receivable aged 0-30 days, which equals $45,000 in this scenario. To find the percentage, we divide the current receivables by total receivables: $45,000 ÷ $85,000 = 0.529. Converting to a percentage gives us 52.9%, which rounds to 53%. This represents the portion of money owed that is still within normal payment terms.
Why the Other Options Are Wrong
Option B: 70%
70% appears to come from an error in total receivables calculation or incorrectly including multiple aging categories as 'current' when only 0-30 days qualifies as current.
Option D: 45%
65% would result from adding current and near-current receivables ($45,000 + $25,000 = $70,000) and dividing by total ($70,000 ÷ $85,000), but this incorrectly includes 31-60 day receivables as current.
Memory Technique
Remember 'Current = 0-30 days ONLY' - use the acronym 'COTO' (Current Only Thirty-zero) to avoid including other aging periods in current receivables calculations.
Reference Hint
Business and Finance for Contractors - Chapter on Accounts Receivable Management and Financial Ratio Analysis
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