Question

The following information is available for Bergstrom Inc. and Sineann Inc. at December 31, 2016:

Accounts	Bergstrom			Sineann
Accounts receivable	$	57,400		$	79,000
Allowance for doubtful accounts		2,648			2,356
Sales revenue		666,960			907,100
Required a. What is the accounts receivable turnover for each of the companies for 2016? (Round your answers to 1 decimal place.) b. What is the average days to collect the receivables for 2016? (Use 365 days in a year. Do not round intermediate calculations. Round your answers to the nearest whole number.) c. Assuming both companies use the percent of receivables allowance method, what is the estimated percentage of uncollectible accounts for each company? (Round your percentage answers to nearest whole number.)

Answer 1

a.

Net Accounts receivable = Accounts receiavble - Allowance for doubtful accounts

	Bergstrom	Sineann
Accounts receivable	57,400	79,000
Allowance for doubtful accounts	2,648	2,356
Net Accounts receivable	54,752	76,644

Accounts receivable turnover = Sales revenue / Net Accounts receivable

	Bergstrom	Sineann
Sales revenue	666,960	907,100
Net Accounts receivable	54,752	76,644
Accounts Receivable turnover	12.2 times	11.8 times

b.

Average days to collect the receivables for 2016 = 365 / Accounts receivable turnover

	Bergstrom	Sineann
Accounts receivable turnover	12.2	11.8
Average days to collect the receivables for 2016	30 days	31 days

c.

Estimated percentage of uncollectible accounts for each year = Allowance for doubtful accounts / Accounts receivable

	Bergstrom	Sineann
Allowance for doubtful accounts	2,648	2,356
Accounts receivable	57,400	79,000
Estimated percentage of uncollectible accounts	5%	3%