At December 31, 2005, Zurich Company reported this info on itsbalance sheet. Acc

Question

At December 31, 2005, Zurich Company reported this info on itsbalance sheet.

Accounts receivable $960,000
Less: Allowance for doubtful accounts $70,000

During 2006 the company had the following transactions related toreceivables.
1. Sales on account $3,800,000
2. Sales returns and allowances $50,000
3. Collections of accounts receivable $3,000,000
4. Write-offs of accounts receivable deemed uncollectible$90,000
5. Recovery of bad debts previously written off as uncollectible$40,000

Compute the receivables turnover ratio and average collectionperiod. I'm not sure but I got 3,800,000/960,000+1,620,000/2=2.9times 365/2.9=125.9 days At December 31, 2005, Zurich Company reported this info on itsbalance sheet.

Accounts receivable $960,000
Less: Allowance for doubtful accounts $70,000

During 2006 the company had the following transactions related toreceivables.
1. Sales on account $3,800,000
2. Sales returns and allowances $50,000
3. Collections of accounts receivable $3,000,000
4. Write-offs of accounts receivable deemed uncollectible$90,000
5. Recovery of bad debts previously written off as uncollectible$40,000

Compute the receivables turnover ratio and average collectionperiod. I'm not sure but I got 3,800,000/960,000+1,620,000/2=2.9times 365/2.9=125.9 days

Explanation / Answer

Account Receivable, Dec 31, 2005 960,000 Add: Sales 3,800,000 Less: Sales Return      50,000      Net Credit Sales 3,750,000 Sub-Total 4,710,000 Less: Collection          Write-Off 3,000,000      90,000 2,910,000 Account Receivable, Dec 31, 2006 1,800,000 Average account Receivable = (960,000+1,800,000)/2 = 1,380,000 Receivable turnovers = 3,750,000/1,380,000 = 2.72 times Average collection period = 365/2.72 = 134.32 days

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.