1
Required:
a. Compute the ending balance of accounts receivable.
b. Compute the accounts receivable turnover for 2016.
c. Compute the average collection period in days.

1 Answer

2

Answer:

a $210,000

b 21.69 times

c 16.83 average days

Explanation:

a. The ending balance of accounts receivable

= Accounts receivables at the beginning - Cash collections + Net Credit sales

Given that;

Accounts receivables at the beginning = $140,000

Cash collections = $3,725,000

Net Credit sales = $3,795,000

Ending balance of accounts receivable

= $140,000 + $3,795,000 - $3,725,000

= $210,000

b. Compute the accounts receivable turnover

= Net credit sales + [(Beginning account receivable + Ending account receivable) / 2]

= $3,795,000 ÷ [ ($140,000 + $210,000)/2]

= $3,795,000 ÷ $175,000

= 21.69 times

c. Compute the average collection period

= Average accounts receivable ÷ [Annual sales ÷ 365]

= $175,000 ÷ ($3,795,000 ÷ 365)

= $175,000 ÷ $10,397

= 16.83 average days to collect receivables

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Theresa Grant
15.5k 3 10 26
answered 10 months ago