Question

Question 10 View Policies Current Attempt in Progress cice and Solutions Manual Presented below is information for Sunland Company. 1. Beginning-of-the-year Accounts Receivable balance was $19,900. 2. Net sales (all on account) for the year were $104,200. Sunland does not offer cash discounts. 3. Collections on accounts receivable during the year were $83,500. Prepare (summary) journal entries to record the items noted above. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

1.

Account Titles	Debit	Credit
Accounts Receivable	$       104,200
Sales Revenue		$         104,200
(Sales made on account)
Cash	$          83,500
Accounts Receivable		$           83,500
(Collections made)

2.
Ending Accounts Receivable = $19900+104200-83500 = $40600
Average Accounts Receivable = ($19900+40600)/2 = $30250

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable
= $104200/30250 = 3.44

Days to collect accounts receivable = 365 / Accounts Receivable Turnover
= 365 / 3.44 = 106.10 days or 105.96 days

3.
Since ratio has decreased, it will take more days to collect receivables
There is decreasing trend in liquidity