Question

It takes Carlson Corp. 30 days on average to collect its accounts receivable. The company began the year with $10,500 in accounts receivable. Sales on credit for the year amounted to $150,000.
Required:
Assuming 360 days in a year, determine the amount of Carlson's accounts receivable at the end of the year.

Answer 1

Answer:

$14,500

Explanation:

For the computation of the amount of Carlson's accounts receivable at the end of the year first we need to follow some steps which is shown below:-

Days sales collected = Total number of days in a year ÷ Account receivable turnover ratio

30 days = 360 days ÷ Account receivable turnover ratio

Account receivable turnover ratio = 12 times

Now as we know that

Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable

12 = $150,000 ÷ Average accounts receivable

Average accounts receivable = $12,500

And, the Average accounts receivable would be

= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2

$12,500 = ($10,500 + Accounts receivable, end of year) ÷ 2

So, Accounts receivable, end of year = $14,500