7-10 Marv's Womens Wear has the following schedule for aging of accounts receivable Age of Receivables, April 30, 2004 Month Percent of of sales Account Amounts Amount due March 31-60 44.000 February 61-90 33.000 January 91-120 Total receivables $200,000 100% a. Fill in column(4) for each month b. If the firm had $960,000 in cred it sales over the four-month period compute the average collection period. Average daily sales should be based on a 120-day period c. If the firm likes to see its bills collected in 30 days, should it be satisfied with the average collection period? d. Disregard ing your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied? e. What additional information does the aging schedule bring to the company that the average collection period may not show? Solution: Mary's women’ s Wear Age of receivables, April 30, 2004 Age of Percent of Month of sales Account Amounts Amount due 0-30 $88,000 40% March 31-60 44.000 20% February 6190 33.000 15% Januar 91-120 55000 Total receivables 220.000 100% S-251 Copyright C2005 by The McGra-Hill Companies, Inc.Copyright © 2005 by The McGraw-Hill Companies, Inc. S-251 7-10. Marv’s Women’s Wear has the following schedule for aging of accounts receivable: Age of Receivables, April 30, 2004 (1) Month of Sales (2) Age of Account (3) Amounts (4) Percent of Amount Due April 0-30 $ 88,000 ________ March 31-60 44,000 ________ February 61-90 33,000 ________ January 91-120 55,000 ________ Total receivables $200,000 100% a. Fill in column (4) for each month. b. If the firm had $960,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period. c. If the firm likes to see its bills collected in 30 days, should it be satisfied with the average collection period? d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied? e. What additional information does the aging schedule bring to the company that the average collection period may not show? Solution: Marv’s Women’s Wear Age of Receivables, April 30, 2004 a. (1) Month of Sales (2) Age of Account (3) Amounts (4) Percent of Amount Due April 0-30 $ 88,000 40% March 31-60 44,000 20% February 61-90 33,000 15% January 91-120 55,000 25% Total receivables $220,000 100%