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  • 1.  PART 2 average collection period for account receivables problem

    Posted 29 days ago
    Dear Friends,

    How can we calculate average collection period? I couldnt calculate Net Sales on Credit?

    Best regards

    The Statement of Financial Position for King Products Corporation for the fiscal years ended June 30, Year 2, and June 30, Year 1, is presented below. Net sales and cost of goods sold for the year ended June 30, Year 2, were $600,000 and $440,000, respectively.
    King Products Corporation
    Statement of Financial Position
    (in thousands)
    June 30
      Year 2
      Year 1
    Cash
    $     60
    $  50
    Marketable securities (at market)
    40
    30
    Accounts receivable (net)
    90
    60
    Inventories (at lower of cost or market)
    120
    100
    Prepaid items
    30
               40
    Total current assets
    $   340
       $280
    Land (at cost)
    $   200
    $190
    Building (net)
    160
    180
    Equipment (net)
    190
    200
    Patents (net)
    70
    34
    Goodwill (net)
    40
             26
    Total long-term assets
    $   660
       $630
    Total assets
    $1,000
       $910
    Notes payable
    $     46
    $  24
    Accounts payable
    94
    56
    Accrued interest
    30
             30
    Total current liabilities
    $   170
       $110
    Notes payable, 10% due 12/31/Year 7
    $     20
    $  20
    Bonds payable, 12% due 6/30/Year 10
    30
                30
    Total long-term debt
    $     50
       $  50
    Total liabilities
    $   220
       $160
    Preferred stock -- 5% cumulative, $100 par, nonparticipating,  
    authorized, issued and outstanding, 2,000 shares
    $   200
    $200
    Common stock -- $10 par, 40,000 shares authorized,
    30,000 shares issued and outstanding
    300
    300
    Additional paid-in capital -- common
    150
    150
    Retained earnings
    130
         100
    Total equity
    $   780
       $750
    Total liabilities & equity
    $1,000
       $910
     
    Question17 King Products Corporation's average collection period for the fiscal year ended June 30, Year 2, using a 360-day year was


    ------------------------------
    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------


  • 2.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago

    I'm getting D. 45 days, with the assumption of the whole $600,000 being credit sales. It's hard to take into account all of cash flow possibilities just to separate cash and credit sales with the sales figure given above. 

    What is the correct answer per testbank?



    ------------------------------
    Gabriel Alan Otto
    Accountant
    Streamwood IL
    United States
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  • 3.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago
    Dear Gabriel,

    Yes the correct answer is 45 days and I totally agree with you that the question doesnt indicate Sales on Credit explicitly..

    Thank you for your help, I wish you have a nice day.

    Regards

    ------------------------------
    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------



  • 4.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago
    I think all the other information is irrelevant. DSO = 45 days is the closest answer. Just use the 600,000 as net credit sales.

    ------------------------------
    Kiranraj Tanwar
    Director/Manager
    Nallasopara MH
    India
    ------------------------------



  • 5.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago
    Hello Dear

    Please follow the below formula to calculate to collection period

    =Average account Receivable
          Net Credit Sales                       X 360 days

    Average Account Receivable = Opening Receivable+ Ending Receivable
                                                                               2
                                                    =     60000+90000/2  = 75000

    Net Sales = 600000

    So here we have to apply formula mentioned in Above= 75000 / 600000*360 = 45 days

    so option : D is Correct


    ------------------------------
    Naeem Ghulam Hussain
    Accountant
    ------------------------------



  • 6.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago
    Good day
    I would assume the credit sales is the net sales.

    Regards





  • 7.  RE: PART 2 average collection period for account receivables problem

    Posted 28 days ago
    Hi Dear,

    Yes because there is no further information if the sales was on credit or cash, so we can be assume the net sales as credit sales.

    thanks
    Regards

    ------------------------------
    Naeem Ghulam Hussain
    Accountant
    ------------------------------