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The current asset section of the Moorcroft Outboard Motor Company's balance sheet reported the following amounts: 12/31/2021 $400,000 12/31/2020 $300,000 Accounts receivable, net The average collection period for 2021 is 50 days. Required: Determine net sales for 2021. (Use 365 days in a year. Do not round intermediate calculations.) Net sales

User Jongwoo
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5 votes

Final answer:

The net sales for Moorcroft Outboard Motor Company for the year 2021 are calculated using the average accounts receivable and the average collection period, yielding approximately $2,557,077.63.

Step-by-step explanation:

The student is asking how to calculate the net sales for the year 2021, given the average collection period and the net accounts receivable for two consecutive years. To find the net sales, we need to use the average collection period formula, which involves accounts receivable and days in the year. Here is the calculation you would need:

First, calculate the average accounts receivable:

($400,000 on 12/31/2021 + $300,000 on 12/31/2020) / 2 = $350,000


Then apply the average collection period formula:

Net Sales = Average Accounts Receivable / (Average Collection Period / 365)

Net Sales = $350,000 / (50 / 365) = $350,000 / 0.1369863 = $2,557,077.63

Therefore, the net sales for Moorcroft Outboard Motor Company for the year 2021 are approximately $2,557,077.63.

User Bharti
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4 votes

Final answer:

To calculate the net sales for 2021, the formula Net Sales = (Accounts Receivable × 365) / Average Collection Period is used. With an average collection period of 50 days and accounts receivable of $400,000, net sales are determined to be $2,920,000 for the year 2021.

Step-by-step explanation:

To determine net sales for 2021, we need to use the average collection period for accounts receivable and the reported accounts receivable net amounts. The average collection period indicates the average number of days it takes for a company to receive payment after a sale has been made. The formula for the average collection period is:

Average Collection Period = (Accounts Receivable / Net Sales) × 365

We can rearrange this formula to solve for Net Sales as follows:

Net Sales = (Accounts Receivable × 365) / Average Collection Period

From the given data, the average collection period is 50 days, and the accounts receivable amount at the end of 2021 is $400,000. Plugging these values into the equation:

Net Sales = ($400,000 × 365) / 50

Net Sales = $2,920,000 for 2021

User Austin A
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