P3–16 Accounts receivable management An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.

a. Use the year-end total to evaluate the firm’s collection system.

b. If 70% of the firm’s sales occur between July and December, would this information affect the validity of your conclusion in part a? Explain.

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Month of origin July August Accounts receivable $ 3,875 2,000 September 34,025 October 15,100 November 52,000 December 193,000 Year-end accounts receivable $300,000