ACG Test 3 Fin
Star Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of
7.00. What is its average collection period (also known as the days in receivable ratio)?
A. 52 days
B. 30 days
C. 2,555 days
D. 2 days - ANS-A. 52 days
Solution:
The average collection period is computed by dividing the number of days in the year by the
accounts receivable turnover.
The average collection period = 365/7 = 52 days.
Chapter 8, Learning objective 8: Identify ratios to analyze a company's receivables.
Net credit sales are $800,000, average net receivables total $150,000, average inventory totals
$200,000, and the allowance for doubtful accounts totals $8,000. How much is the average
collection period (also known as the days in receivable ratio)?
A. 5.33 days
B. 328.8 days
C. 2.2 days
D. 68.5 days - ANS-D. 68.5
The accounts receivable turnover is net credit sales divided by average net accounts receivable.
The accounts receivable turnover is net credit sales ($800,000) divided by average net accounts
receivable ($150,000), or 5.333 times.
The average collection period is 365 divided by the accounts receivable turnover, which is
365/5.333 = 68.5 days.
, Which one of the following is not a method used by companies to accelerate cash receipts?
A. Offering discounts for early payment
B. Accepting national credit cards for customer purchases
C. Selling receivables to a factor
D. Writing off receivables - ANS-D. Writing off receivables
Which of the following accounts is debited when a company factors its accounts receivable?
A. Service Charge Expense
B. Interest Expense
C. Accounts Receivable
D. Loss on Sale of Accounts Receivable - ANS-A. Service Charge Expense
At what value are accounts receivable reported on the balance sheet?
Cash realizable value
Maturity value
Present value
Fair market value - ANS-a. Cash realizable value
Lansing Construction Company had the following receivables:
Employee advances
$ 500
Star Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of
7.00. What is its average collection period (also known as the days in receivable ratio)?
A. 52 days
B. 30 days
C. 2,555 days
D. 2 days - ANS-A. 52 days
Solution:
The average collection period is computed by dividing the number of days in the year by the
accounts receivable turnover.
The average collection period = 365/7 = 52 days.
Chapter 8, Learning objective 8: Identify ratios to analyze a company's receivables.
Net credit sales are $800,000, average net receivables total $150,000, average inventory totals
$200,000, and the allowance for doubtful accounts totals $8,000. How much is the average
collection period (also known as the days in receivable ratio)?
A. 5.33 days
B. 328.8 days
C. 2.2 days
D. 68.5 days - ANS-D. 68.5
The accounts receivable turnover is net credit sales divided by average net accounts receivable.
The accounts receivable turnover is net credit sales ($800,000) divided by average net accounts
receivable ($150,000), or 5.333 times.
The average collection period is 365 divided by the accounts receivable turnover, which is
365/5.333 = 68.5 days.
, Which one of the following is not a method used by companies to accelerate cash receipts?
A. Offering discounts for early payment
B. Accepting national credit cards for customer purchases
C. Selling receivables to a factor
D. Writing off receivables - ANS-D. Writing off receivables
Which of the following accounts is debited when a company factors its accounts receivable?
A. Service Charge Expense
B. Interest Expense
C. Accounts Receivable
D. Loss on Sale of Accounts Receivable - ANS-A. Service Charge Expense
At what value are accounts receivable reported on the balance sheet?
Cash realizable value
Maturity value
Present value
Fair market value - ANS-a. Cash realizable value
Lansing Construction Company had the following receivables:
Employee advances
$ 500
