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Nite sales- 112,500 beginning receivables, net- 19,000 ending receivables- 18,500 Day sales- 32,000 beginning receivables, net-...

Nite

sales- 112,500

beginning receivables, net- 19,000

ending receivables- 18,500

Day

sales- 32,000

beginning receivables, net- 3,500

ending receivables, net- 4,400

Compute the following for each company:

1. Accounts receivable turnover. (Assume all sales were credit sales.)
2. Average collection period.
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Answer #1

Answer:- Nite:-

1)-Accounts receivable turnover ratio = Net credit sales/Average accounts receivable

= $112500/($19000+$18500/2)

=$112500/$18750 =6 times

2)- Average collection period =360 days/ Accounts receivable turnover ratio

=360 days/6 times =60 days

Day:-

1)-Accounts receivable turnover ratio = Net credit sales/Average accounts receivable

= $32000/($3500+$4400/2)

=$32000/$3950 =8.1 times

2)- Average collection period =360 days/ Accounts receivable turnover ratio

=360 days/8.1 times =44 days

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