Chapter 3, Question 1: Accounts receivable management

This table below shows that Blair Supply had an end-of-year accounts receivable balance of $299,990. The table also shows how much of the receivables balance originated in each of the previous six months. The company had annual sales of $2.40 million and it normally extends 30-day credit terms to its customers.

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 affect the validity of your conclusion in part a? Explain.

Month of Amounts receivable origin July $3,915 August 2,005 September 33,950 October 15,075 November 52,025 December 193,020 Year-end accounts receivable 299,990