an evaluation of the books of Blair company supply Accounts recelvable managemen
ID: 1172621 • Letter: A
Question
an evaluation of the books of Blair company supply Accounts recelvable management An evaluation of the books of Blair SupplEEve the end-dl year accos reclvabie balance,wichis beleved lo const of amourls onignating n the mortrs indcared. hecopy h sales of $2.A0 million. The Srm extonds 30-day aredit terms a. Use the year end total to evaluate the ms collection system b.lf70% ofthe firm's sales ooar between July wd December, would this afectthewlay of your ordnen n part as Expun. The 5rm extends 30-day rei tema The average collection period is 799 days. (Round to two decimal places.) Since the average age of recelvables is about 16 days beyond the net date, atention shouild be directed to accounts necelvable management b.?70% ofte frm's sales ooor tetween Julyard Decenter, would this and vald, of yor enhwon n pat a?(Beled althe arown, that apply) DA. This may explain the lower tumover and higher average collection period (Salect from the drop down menu) B. The Doerter a counts receivabie beance of 300.155 may not be a pod measure ofthe average mort, mwaon, pereby ang the calada ed aveage colecton penod to be aenome C. The seasonality of sales also suggests the November figure (0-30 diays overdue) is not a cause for great ooncem are siaty days or more ovendue and may be a sign of poor receivables management Data Tabe (Cick on the lcon loceled on the top-right comer olf the daia table below in order to copy its contents into a spreadsheet) Month of Amourts receivable Juy August Sepember October 2,020 4,030 5,135 2,060 Year end accounts receivable Print Dore Click to select your answers).Explanation / Answer
(a) Use the year-end total to evaluate the firm’s collection system.
Annual Sales =$2,400,000
Accounts receivables =$300,156
Accounts receivables turnover ratio = Annual sales / accounts receivables =$2400,000/$300,156 =7.99 times Average collection period = 365 Days / Accounts recveivables turnover =365 Days /8 =45.63 Days
Since the average age of receivables is about 16 days (45.63 -30 ) beyond the net date , attention should be directed to accounts receivables management ----' TRUE'
(b) If 70% of the firm’s sales occur between July and December, would this information affect the validity of your conclusion in part a?
Answer is Option (d) About 13% of all account receivables (those arising from July , augest and september ) are sixty days or more overdue and be a sign of poor receivables management
part (a) Average collection period =45.63 days,
But in the Break up given in the Account receivables shows that balance carried forword from July , augest and september are over more than 60 days that means overdue over and above the average collection period . This clearly a sign of Ineffective receivables management
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