Essence of Skunk Fragrances, Ltd., sells 7,400 units of its perfume collection e

Question

Essence of Skunk Fragrances, Ltd., sells 7,400 units of its perfume collection each year at a price per unit of $690. All sales are on credit with terms of 1/15, net 60. The discount is taken by 55 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%u2019s average receivable? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Essence of Skunk Fragrances, Ltd., sells 7,400 units of its perfume collection each year at a price per unit of $690. All sales are on credit with terms of 1/15, net 60. The discount is taken by 55 percent of the customers.

Explanation / Answer

The basic formula is (A/R * 365)/Credit Sales. So A/R = $280,000 and 75% of $3,040,000 = $2,280,000 is the credit sales for the year. So we get (($280,000*365)/2,880,000) = (102,200,000/2,280,000) = 44.82 days

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