Question

Please answer D (last picture)

At December 31, 2017, Runner Imports Inc. reported this information on its balance sheet. Accounts receivable Less: Allowance for doubtful accounts $637,000 39,000 During 2018, the company had the following summary transactions related to receivables and sales. Runner uses the perpetual inventory system. 1. Sales on account amounted to $2,544,000. The cost of the inventory sold was $2,213,280. 2. Sales returns and allowances with a total sales price of $43,000 and a cost of $37,410 were restored to inventory. 3. Collections of accounts receivable were $2,218,000. 4. Write-offs of accounts receivable deemed uncollectible, $43,600. 5. Recovery of bad debts previously written off as uncollectible, $15,400.

Answer 1

Requirement d:

Receivables turnover ratio	3.3	Times
Average collection period	110	Days

Calculations:

Total sales	$2,544,000
Sales returns and allowance	($43,000)
Net sales	$2,501,000
÷ Average accounts receivable [(637,000+876,400)/2]	$756,700
= Receivables turnover ratio	3.3

Average collection period = 365 days ÷ Receivables turnover ratio = 365/3.3 = 110 days