Question

Megan LLC account receivable = 240,000 on Jan 1, 2019 There was a net credit of...

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.

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Answer #1

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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