What average age of account receivable is forecast for the budget period? (Use t

Question

What average age of account receivable is forecast for the budget period? (Use the following data to answer this question.) BALANCE SHEETS 0.003$30201 2003 ASSETS CASH ACCOUNT RECEIVABLE OTHER CURRENT ASSETS TOTAL CURRENT ASSETS OTHER ASSETS (NET) TOTAL ASSETS 12/32/20X2 12/31/20X3 $40,000 80,000 30,000 $50,000 120,000 15,000 150,000 25,000 $175,000 185,000 20,000 $205,000 EQUITIES ACCOUNT PAYABLE TAX PAYABLE NOTES PAYABLE TOTAL CURRENT LIABILITIES LONG TERM DEBT CAPTIAL STOCK RETAINED EARNINGS NET WORKTH TOTAL EQUITIES $25,000 5,000 25,000 $35,000 5,000 20,000 55,000 50,000 60,000 65,000 50,000 20,000 50,000 30,000 70,000 $175,000 80,000 $205,000

Explanation / Answer

First calculate the Receivables Turnover = Annual Sales / Average Receivables Annual Sales = $608,000 Average Receivables = ($80,000 + $120,000)/2 = $100,000 Receivables Turnover = 608,000 / 100,000 = 6.08 Average age of receivables = 365 days / Receivables Turnover = 365/6.08 = 60 days.

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