Question

the following data exists for Carley Company.

		2018		2017
Accounts Receivable		$50,000		$70,000
Net Sales		500,000		410,000

Calculate the accounts receivable turnover and the average collection period for accounts receivable in days for 2018. (Use 365 days for calculation. Round answers to 1 decimal place, e.g. 15.2.)

Accounts receivable turnover			times
Average collection period			days

  

Answer 1

Accounts Receivables Turnover Ratio (times) = Net Credit Sales / Average Accounts Receivables

Average Accounts Receivables = (Opening Accounts Receivables + Closing Accounts Receivables )/ 2

= ( $ 70,000 + $ 50,000) /2

= $ 60,000

Accounts Receivables Turnover Ratio (times) = $ 500,000 / $ 60,000

= 8.33 times

Average Collection Period = Days in a period( assuming 365 days) / Accounts receivables turnover ratio

= 365 / 8.33

= 43.81 or 44 days

therefore,

Accounts Receivables Turnover Ratio	8.33	times
Average Collection Period	44	days