Question

Recent financial statements of Larkspur Ship Builders, Inc. report net sales of $668,500,000. Accounts receivable are $64,400,000 at the beginning of the year and $90,500,000 at the end of the year. (Round answers to 2 decimal places, e.g. 50.27. Use 365 days for calculation.)

Compute Larkspur’s accounts receivable turnover.

Accounts receivable turnover

times

Compute Larkspur’s average collection period for accounts receivable in days.

Average collection period for accounts receivable

days

Answer 1

Answer:

Accounts Receivable Turnover = 8.63 times

Average Collection Period for Accounts Receivable = 42.29 Days

Workings:

1. Accounts Receivable Turnover = Net Sales ÷ Average Net Receivables = $668,500,000 ÷ $77,450,000 = 8.63 Times

{Average Net Receivables = (Receivable at Beginning + Receivable at the End) ÷ 2 = ($64,400,000 + $90,500,000) ÷ 2 = $77,450,000}

2. Average Collection Period for Accounts Receivable = 365 ÷ Accounts Receivable Turnover = 365 ÷ 8.63 = 42.29 Days

Please do not forget to like the answer if you find it useful. It encourages me to help the students by answering further questions.

​​​​​​Thank you