If accounts receivables turnover ratio for the year 2012 was 5 times, Part A) wh

Question

If accounts receivables turnover ratio for the year 2012 was 5 times, Part A) what will be the average collection period? Part B) Assuming the same turnover ratio, what will be the value of opening accounts receivables if value of credit sales for the year 2012 was $ 175000 and closing accounts receivables was $ 40000? (Assume 365 days in a year)? Part C) assuming the figure of opening A/R in part B, what will be the accounts receivables turnover ratio if the value of credit sales for the year 2012 was $ 115000?

Explanation / Answer

Part a) Average Collection Period = 365/5 = 73 Days Part b) Value of Opening AR would be: 175000/(x+40000)/2 = 5 350000 = 5x + 200000 X = 30000 Part c) Revised A/R Turnover Ratio: =115000/(30000+40000)/2 = 6.57 times

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