Question

Route Canal Shipping Company has the following schedule for aging of accounts receivable: Age of Receivables April 30, 20X1 (1) (2) (3) (4) Month of Sales Age of Account Amounts Percent of Amount Due April 0–30 $ 131,760 _______ March 31–60 49,410 _______ February 61–90 115,290 _______ January 91–120 32,940 _______ Total receivables $ 329,400 100% a. Calculate the percentage of amount due for each month.

a. Calculate the percentage of amount due for each month.

b. If the firm had $1,464,000 in credit sales over the four-month period, compute the average collection period. Average daily credit sales should be based on a 120-day period.

c. If the firm likes to see its bills collected in 32 days, should it be satisfied with the average collection period?

d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?

Answer 1

a.

Month of sales	Age of account	Amount	Percentage of amount due
April	0-30	131760	40%
March	31-60	49410	15%
February	61-90	115290	35%
January	91-120	32940	10%
		329400

b. Average daily credit sales = 1,464,000 / 120 = 12200

Average collection period = 329400 / 12200 = 27 days

c. Yes

d. No .