Question

The following data exists for Carley Company. 20182017 Accounts Receivable$50,000$70,000 Net Sales500,000410,000 Calculate the accounts receivable turnover and the average collection period for accounts receivable in days for 2018. (Use 365 days for calculation. Round answers to 1 decimal place, e.g. 15.2.) Accounts receivable turnover times Average collection period days

Answer 1

8.3 times

43.8 days

Step-by-step explanation:

Accounts receivable turnover measure the average times the company received their receivable, It measure the efficiency of the company regarding collection from customers. Turnover will be higher if company has low ratio of receivables to sales value.

Average Receivable can be calculated as below

Average Receivable = (Accounts Receivable at the beginning of the year + Accounts Receivable at the end of the year) / 2 = ($50,000 + $70,000)/2 = $60,000

Net Sales = $500,000

Formula for Accounts receivable turnover is as follow

Accounts receivable turnover = Net Sales / Average Receivable

Accounts receivable turnover = $500,000 / $60,000 = 8.3 times

Days Sales Receivable is also know as Days receivables. It is an method of estimation of a company for the receivables value. it measure the numbers of days at average account receivable take after sales to convert into cash.

Formula for Days Sales Receivable is as follow

Days Sales Receivable = ( $60,000 / $500,000 ) x 365 = 43.8 days