Sales (on credit terms) A/R Balance Current 31-60 61-90 90+ Jan 3390 6,200 3,345 1795 1000...

	Sales (on credit terms)	A/R Balance	Current	31-60	61-90	90+
Jan	3390	6,200	3,345	1795	1000	60
Feb	3,610	6,000	3,560	1,550	825	65
Mar	3890	6,340	3,590	1800	900	50
Total	10,890

using the sample ATB above, compute the collection effectiveness index of the company (10Items must show solutions). Then provide analysis of the effect of the result when it will decrease and when it will increase?

Expert Solution


Collection Effectiveness Index:(CEI)
(Beginning Receivable+Credit Sales-Ending TOTAL Receivable)/(Beginning Receivable+Credit Sales-Ending CURRENT Receivable)
Beginning Receivable (Jan AR Balance)	$6,200
Credit Sales	$10,890
Ending TOTAL Receivable	$6,340
Ending CURRENT Receivable	$3,590
(Beginning Receivable+Credit Sales-Ending TOTAL Receivable)	$10,750	(6200+10890-6340)
(Beginning Receivable+Credit Sales-Ending CURRENT Receivable)	$13,500	(6200+10890-3590)

Collection Effectiveness Index:	0.7963	(10750/13500
Collection Effectiveness Index:	79.63%

If CEI increases, collection is better
Best CEI (ideal) is 100%
This means Ending Total and Current Receivables are equal
If CEI decreases,the reasons need to be investigated

jeff jeffy answered 2 years ago

Number of Days Unpaid Customer Total 0-30 31-60 61-90 Over 90 Aerosmith $ 2,000 $ 1,000...

Number of Days Unpaid Customer Total 0-30 31-60 61-90 Over 90 Aerosmith $ 2,000 $ 1,000 $ 1,000 Biggie Small 2,000 $ 1,000 $ 1,000 Others (not shown to save space) 100,200 39,300 42,300 9,300 9,300 ZZ Top 7,300 7,300 Total Accounts Receivable $ 111,500 $ 47,600 $ 43,300 $ 10,300 $ 10,300 Estimated uncollectible (%) 5% 15% 25% 40% Elite Events Corporation has provided event planning services for several years. The company uses the percentage of credit sales method...

Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 553,900...

Days Past Due Customer Balance Not Past Due 1-30 31-60 61-90 91-120 over 120 Subtotals 553,900 307,500 132,900 60,900 20,500 18,300 13,800 The following accounts were unintentionally omitted from the aging schedule: Customer Due Date Balance Arcade Beauty May 28, 20Y1 $3,000 Creative Images Sept. 7, 20Y1 6,200 Excel Hair Products Oct. 17, 20Y1 800 First Class Hair Care Oct. 24, 20Y1 2,100 Golden Images Nov. 23, 20Y1 700 Oh The Hair Nov. 29, 20Y1 3,600 One Stop Hair Designs...

Trix Company sells to grocery stores on credit terms of "net 60." Annual credit sales are...

Trix Company sells to grocery stores on credit terms of "net 60." Annual credit sales are $11 million (spread evenly throughout the year) and its accounts average 10 days overdue. The firm's variable cost ratio is 0.75 (i.e., variable costs are 75% of sales). Suppose that Trix's sales are expected to increase by 32% next year. Determine the firm's average investment in receivables for next year under these conditions. Enter your answers in millions and round to the second decimal...

Dome Metals has credit sales of $180,000 yearly with credit terms of net 60 days, which...

Dome Metals has credit sales of $180,000 yearly with credit terms of net 60 days, which is also the average collection period. a. Assume the firm offers a 3 percent discount for payment in 18 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 12 percent. What will the net gain or loss be to the firm if this discount...

95. Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected...

95. Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 60% in the next month, and 10% in the following month. On December 31, the accounts receivable balance includes $32,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $70,000 and $140,000, respectively. What are the expected cash receipts for February from current and past...

Assume that credit sales "to be received in 90 days" are received in exactly 90 days...

Assume that credit sales "to be received in 90 days" are received in exactly 90 days and that EFT wage payments are made in exactly 7 days. Expected to pay income tax of 35%? And its journal entries CR and DR 01-January-2016 Open business bank account with transfer of personal funds $210,000 02-January-2016 EFT for rental of office space. Immediate occupancy. 60 months at $3500 per month. $210,000 11-January-2016 Office equipment purchased for cash to get discount from the retail...

Age of A/R Total Balance as of 3/31 Estimated Percentage Uncollectable 1-30 Days $77,300 3% 31-60...

Age of A/R Total Balance as of 3/31 Estimated Percentage Uncollectable 1-30 Days $77,300 3% 31-60 Days $22,900 5% 61-90 Days $9,400 24% 91+ Days $7,200 54% Total Balance $116,800 1) Prepare the journal entry for bad debt expense on 3/31, assuming a credit (positive) balance of $1,400 in the Allowance for Doubtful Accounts before adjustment. 2) Prepare the journal entry for bad debt expense on March 31st, assuming instead that the company has a debit (negative) balance of $1,400...

Q1. Best Value Company has provided the following information: Current Annual Sales (Credit Sales): P3,600,000 Terms:...

Q1. Best Value Company has provided the following information: Current Annual Sales (Credit Sales): P3,600,000 Terms: 45 Days Interest Rate or Cost of Finance: 15% p.a. Potential New Policy: Analyst 1 has suggested to offer a discount to customers with this policy: 1/15 net 45. Analyst 1 expects that 50% of customers will take advantage of the discount. Analyst 2 however says that customers will not be enticed and for 50% of customers to take advantage of the discount, the...

Ordonez Lumber Yard has a current accounts receivable balance of $439,016. Credit sales for the year...

Ordonez Lumber Yard has a current accounts receivable balance of $439,016. Credit sales for the year just ended were $5,384,500. What is the receivables turnover? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Receivables turnover _______ times What is the days’ sales in receivables? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Days’ sales in receivables ________ days How long did it take on average for...

Trout Lumber Yard has a current accounts receivable balance of $440,016. Credit sales for the year...

Trout Lumber Yard has a current accounts receivable balance of $440,016. Credit sales for the year just ended were $5,153,850. What is the receivables turnover? What is the days’ sales in receivables? How long did it take on average for credit customers to pay off their accounts during the past year?

Question