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# Novak Corp. had accounts receivable of \$140,000 on January 1, 2022. The only transactions that affected accounts receivable during 2022 were net credit sales of \$3,795,000, cash collections of \$3,725,000, and accounts written off of \$20,000.

Asked 10 months ago
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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.

2

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 ##### Theresa Grant
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answered 10 months ago