Question

The financial statements of Minnesota Mining and Manufacturing Company (3M) report net sales of $20.0 billion. Accounts receivable (net) are $2.7 billion at the beginning of the year and $2.8 billion at the end of the year Compute 3M's accounts receivable turnover. (Round answer to 1 decimal place, e.g. 2.5.) Accounts Receivable Turnover times Compute 3M's average collection period for accounts receivable in days. (Round answer to O decimal places, e.g. 50. Use 365 days for calculation.) Average Collection Period days

Answer 1

7.3 times and 50 days

Step-by-step explanation:

The computation is shown below:

As we know that

Account receivable turnover ratio = Net sales ÷ Average accounts receivable

where,

Net sales is $20 billion

And, the Average accounts receivable would be

= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2

= ($2.7 billion + $2.8 billion) ÷ 2

= $2.75 billion

So, the accounts receivable turnover ratio would be

= $20 billion ÷ $2.75 billion

= 7.3 times

Now the average collection period would be

= Total number of days in a year ÷ Accounts receivable turnover ratio

=365 days ÷ 7.3

= 50 days