Question

all of 18.11 please

BE18.11 (LO 3) Writing The following data are taken from the financial statements of Colby Company Evaluate collection of accounts receivable. 2020 Accounts receivable (net), end of year Net sales on account Terms for all sales are 1/10, n/45 $ 550,000 4,300,000 2019 $ 540,000 4,000,000 a. Compute for each year (1) the accounts receivable turnover and (2) the average collection period. At the end of 2018, accounts receivable was $520,000. b. What conclusions about the management of accounts receivable can be drawn from these data?

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer 2 Parta) 4 Year 5 Account Receivable Turnover 2020 7.89 (4300000/((550000+540000)/2)) 46.26 (365/7.89) 2019 7.55 (4000000/((540000+520000)/2)) 48.36 (365/7.55) 7 Average collection Period 10 Formula 11 Account reecivable turnover = net sales / average account receivable 13 Average collection period = 365 / account receivable turnover ratio 14 15 Part b) Both the ratios has improved as compared to previous year, as receivable turnover ratio has increased, this means sales are beginning realised earlier as compared to previous year, but still it is not being realised in 45 16 days. 17 18 Thank You