Question

12. (6 points) Echo Corp. reported the following figures from its financial statements for the years 2013 through 2015 Net credit sales Accounts receivable 2015 860,222 66,444 2014 1,344,560 92,008 2013 888,600 67,855 Required: A. Calculate for 2015: 1. Accounts receivable turnover 2. Average collection period B. Calculate for 2014: 1. Accounts receivable turnover 2. Average collection period

Answer 1

A.

1. Accounts receivable turnover = Net credit sales for the year / Average accounts receivable

= Net credit sales for 2015 / [( accounts receivable of 2014 + accounts receivable of 2015) /2]

= $ 860,222/ [ ( $ 92008+66444) /2]

= 10.85782445

= 10.86 times

2. Average Collection Period = Number of days in a year / Accounts receivable turnover

= 365 / 10.85782445

= 33.62 days

B.

1. Accounts receivable turnover = Net credit sales for the year / Average accounts receivable

= Net credit sales for 2014 / [( accounts receivable of 2014 + accounts receivable of 2013) /2]

= $ 1,344,560 / [ ( $ 92008 +67855) /2]

= 16.82140333

= 16.82 times

2. Average Collection Period = Number of days in a year / Accounts receivable turnover

= 365 / 16.82140333

= 21.70 days