The following data are taken from the financial statements of Colby Company. 2017 2016 Accounts receivable (net), end of year $ 550,000 $ 540,000 Net sales on account 4,300,000 4,000,000 Terms for all sales are 1/10, n/45 Compute for each year the accounts receivable turnover. At the end of 2015, accounts receivable was $520,000. (Round answers to 1 decimal place, e. g. 12.5.) 2017 2016 Accounts receivable turnover Enter turnover in times rounded to 1 decimal place. times Enter turnover in times rounded to 1 decimal place. times Compute for each year the average collection period. (Round answers to 1 decimal place, e. g. 12.5. Use 365 days for calculation.) 2017 2016 Average collection period Enter the collection period in days rounded to 1 decimal place. days Enter the collection period in days rounded to 1 decimal place. days

Question

Nayeli Bonilla

Business

4 October, 13:18

The following data are taken from the financial statements of Colby Company. 2017 2016 Accounts receivable (net), end of year $ 550,000 $ 540,000 Net sales on account 4,300,000 4,000,000 Terms for all sales are 1/10, n/45 Compute for each year the accounts receivable turnover. At the end of 2015, accounts receivable was $520,000. (Round answers to 1 decimal place, e. g. 12.5.) 2017 2016 Accounts receivable turnover Enter turnover in times rounded to 1 decimal place. times Enter turnover in times rounded to 1 decimal place. times Compute for each year the average collection period. (Round answers to 1 decimal place, e. g. 12.5. Use 365 days for calculation.) 2017 2016 Average collection period Enter the collection period in days rounded to 1 decimal place. days Enter the collection period in days rounded to 1 decimal place. days

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Zaria · Answer 1

In 2017, the accounts receivable turnover and collection period is 7.8 times & 46.7 days.

In 2016, the accounts receivable turnover and collection period is 7.54 times & 48.6 days.

Explanation:

Accounts Receivable turnover : Accounts receivable turnover represents the ratio between accounts receivable and turnover.

The accounts receivable is the amount which is not yet received from customers for the good supplied by the company.

The formula for computing accounts receivable turnover is shown below =

= Turnover : average accounts receivable

= Turnover : (opening accounts receivable + Ending accounts receivable) : 2

Collection Period : The collection period denotes that period in which the company is able to receives its payment.

The formula is for collection period is shown below:

= No of days in a year : average accounts receivable

Now, put the values in the above formula

First we calculate for 2017:

Accounts receivable turnover = $4,300,000 : ($ 550,000 + $ 540,000) : 2

= $4,300,000 : $545,000

= 7.8 times

Collection Period = 365 : 7.8 = 46.7 days

For 2016:

Accounts receivable turnover = $4,000,000 : ($520,000 + $ 540,000) : 2

= $4,000,000 : $530,000

= 7.5 times

Collection Period = 365 : 7.5 = 48.6 days

Thus, in 2017, the accounts receivable turnover and collection period is 7.8 times & 46.7 days.

In 2016, the accounts receivable turnover and collection period is 7.54 times & 48.6 days.