Essence of Skunk Fragrances, Ltd., sells 8,700 units of its perfume collection e

ID: 2624249 • Letter: E

Question

Essence of Skunk Fragrances, Ltd., sells 8,700 units of its perfume collection each year at a price per unit of $730. All sales are on credit with terms of 2/15, net 60. The discount is taken by 80 percent of the customers.

Calculate the average collection period. (Round your answer to 2 decimal places. (e.g., 32.16))

What is the receivables turnover? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

What is the amount of the company

Calculate the average collection period. (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Average collection period = 15*0.80 + 60*0.20

= 24 days

Average receivables = Annual Credit sales* Average collection period/365

= (8700*730)*24/365

= $417600

Receivables turnover = Net Credit Sales/Average accounts receivable

= (8700*730)/417600

= 15.21 times