Problem 8-2A (Part Level Submission) At December 31, 2016, Indigo Corporation Im

Question

Problem 8-2A (Part Level Submission) At December 31, 2016, Indigo Corporation Imports reported this information on its balance sheet. Accounts receivable Less: Allowance for doubtful accounts During 2017, the company had the following transactions related to recelvables. 1. Sales on account 2. Sales returns and allowances $652,800 38,030 3. Collections of accounts receivable 4. Write-offs of accounts receivable deemed uncollectible 5. Recovery of bad debts previously written off as uncollectible $2,883,800o 85,386 2,592,000 44,010 14,500

Explanation / Answer

Accounts receivale turnover = Net Sales / Accounts receivable

= (2883800 - 85386) / 652800

= 4.29

Average collection period = 365 / Accounts receivable turnover

= 365 / 4.29

= 85 days

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