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	$	161,820	_______
March	31–60		71,920	_______
February	61–90		107,880	_______
January	91–120		17,980	_______
Total receivables		$	359,600	100%

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

b. If the firm had $1,488,000 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 34 days, should it be satisfied with the average collection period?

• Yes

• No

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

• Yes

• No

Answer 1

Requirement (a) Month of Sales April March February January Amounts % of Amount Due $ 161,820 45.00% $ 71,920 20.00% $ 107,880 30.00% $ 17,980 5.00% $ 359,600 Requirement (b) Average Collection Period: 120*359600/1488000 29 Days Requirement (c) Yes Because Collection Period is 29 Days which is less than 34 Days Requirement (d) No Because More than 35% of Receivables is 60 days old Note : Please comment down for any further clarifications