17.7. Size of Account Receivables.

a. First scenario

1. The total sales of the firm are equal to the total credit sales since all sales are on credit. (Show work):

Total credit sales =

2. The average collection period is the percentage of accounts taking the discount times the discount period, plus the percentage of accounts not taking the discount times the days until full payment is required. (Show work):

Average collection period =

3. The receivables turnover is 365 divided by the average collection period. (Show work):

Receivables turnover =

4. Average receivables. (Show work):

Average receivables =

b. Change in policy. Explain.

Size of Accounts Receivable. Essence of Skunk Fragrances, Ltd., sells 6,500 units of its perfume collection each year at a price per unit of $270. All sales are on credit with terms of 1/10, net 30. The discount is taken by 40 percent of the customers. What is the amount of the company's accounts receivable? In reaction to sales by its main competitor, Sewage Spray, Essence of Skunk is considering a change in its credit policy to terms of 3/10, net 30 to preserve its market share. How will this change in policy affect accounts receivable