The following data are taken from the financial statements of Crane Company. 2022 2021 Accounts receivable (net), end of year $ 567,900 $ 555,000 Net sales on account 4,831,000 4,179,000 Terms for all sales are 1/10, n/45
1) Compute for each year the accounts receivable turnover. At the end of 2015, accounts receivable was $511,500. (Round answers to 1 decimal place, e. g. 12.5.)
2) Compute for each year the average collection period. (Round answers to 1 decimal place, e. g. 12.5. Use 365 days for calculation.)

Answer and Explanation:

The computation is shown below;

(1)

As we know that

The receivables turnover = Net credit sales ÷ Average account receivable  

For the year 2017

Receivables turnover = $4,831,000 ÷ $561,450 = 8.60 times

for the year 2016:

Receivables turnover = $4,179,000 ÷ $533,250 = 7.84 times

Average net AR = (Beginning AR + Ending AR) ÷ 2

2017 = ($567,900 + $555,000) ÷ 2  = $561,450

2016 = ($555,000 + $511,500) ÷ 2 = $533,250

(2)

The average collection period = 365 days ÷ Receivables turnover

For 2017:

Average collection period = 365 ÷ 8.60 = 42.44 days

For 2016

Average collection period = 365 ÷ 7.84 = 46.56 days

​participate in networking opportunities that allow you to get to know potential clients, other entrepreneurs, influential people in your community, etc. focus on doing everything you can to cultivate posting word of mouth advertisin