An evaluation of the books of Blair Supply, shich follows, gives the end of year

Question

An evaluation of the books of Blair Supply, shich follows, gives the end of year accounts recievable balance, which is believed to consist of amounts origiating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.

$3875

Use the year end total to evaluate the firms collection system

if 70% of the firms sales occur between July and December would this information affect the validity of your conclusion in part A? Explain.

Month of orgin Accounts Receivable July

$3875

August 2000 September 34025 October 15100 November 52000 December 193000 Year end accounts receivable 300000

Explanation / Answer

Average Sales per day = Annual Sales /360 =2400000/180 = 13333.33 Average collection period = Accounts Receivables / Average sales per day = $300000/$13333.33 = 22 Companies 22 days average collection period is acceptable for a companies having 30 days credit term if 70% of the firms sales occur between July and December would this information affect the validity of your conclusion in part A? Explain. Average Sales per day = Annual Sales /360 =2400000*.70/180 = 9333.33 Average collection period = Accounts Receivables / Average sales per day = $300000/$9333.33 = 32 Companies 32 days average collection period is not good for a companies having 30 days credit term

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