Exercise 8-14 Kerwick Company had accounts receivable of $181,600 on January 1,

Question

Exercise 8-14

Kerwick Company had accounts receivable of $181,600 on January 1, 2017. The only transactions that affected accounts receivable during 2017 were net credit sales of $1,439,600, cash collections of $1,359,500, and accounts written off of $30,000.

Exercise 8-14

Kerwick Company had accounts receivable of $181,600 on January 1, 2017. The only transactions that affected accounts receivable during 2017 were net credit sales of $1,439,600, cash collections of $1,359,500, and accounts written off of $30,000.

Explanation / Answer

Answer:- 1)-Ending balance of accounts receivable:-

Opening balance +Net credit sales-Cash collections-Written off

=$181600+$1439600-$1359500-$30000

=$231700

2)- Accounts receivable turnover:-

Accounts receivable turnover ratio = Net credit sales/Average accounts receivable

                                                          = $1439600/($181600+$231700/2)

                                                          =$1439600/$206650

                                                          =6.97 times

3)-Average collection period:- 365 days/ Accounts receivable turnover ratio                                            

                                                = 365 days/6.97 times = 52.4 Days

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