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

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