Question

In 2020, Nash Company has net credit sales of $1,030,000 for the year. It had a beginning accounts receivable (net) balance of $100,000 and an ending accounts receivable (net) balance of $106,000.

Compute Nash Company’s accounts receivable turnover. (Round answer to 1 decimal place, e.g. 2.5.)

Accounts receivable turnover

times

  

  

Compute Nash Company’s average collection period in days. (Round answer to 1 decimal place, e.g. 2.5. Use 365 days for calculations.)

Average collection period

days

Answer 1

Answer of Part 1:

Sales = $1,030,000

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($100,000 + $106,000) / 2
Average Accounts Receivable = $103,000

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $1,030,000 / $103,000
Accounts Receivable Turnover = 10 times

Answer of Part 2:

Average Collection Period = 365 days / Accounts Receivable Turnover
Average Collection Period = 365 / 10
Average Collection Period = 36.5 days