Megan LLC account receivable = 240,000 on Jan 1, 2019
There was a net credit of =1,700,000 during 2019.
cash collection of =1,698,000
accounts written off = 30,000
A) Compute account receivable turn over for this year?
B)Average collections period in days? 365 days for calulations.
Please show work so I can understand how to find solutions.
Answer :
Account receivable on Dec 31, 2019
= Account receivable on Jan 1, 2019 + Net credit - Cash collection - Accounts written off
= 240,000 + 1,700,000 - 1,698,000 - 30,000
= 212,000
Average Account receivable = (240,000 + 212,000) / 2 = 226,000
a. Account receivable turnover for this year :
Account receivable turnover ratio
= Net credit sales / Average Account receivable
= 1,700,000 / 226,000
= 7.52 times
b. Average collections period in days ;
Average collections period
= 365 days / Account receivable turnover ratio
= 365 days / 7.52 times
= 48.54 days
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