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

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

Accounts	Bergstrom			Sineann
Accounts receivable	$	56,800		$	80,200
Allowance for doubtful accounts		3,048			2,756
Sales revenue		606,960			887,100

Required

a.	What is the accounts receivable turnover for each of the companies for 2016?

b.

What is the average days to collect the receivables for 2016?
 

c.

Assuming both companies use the percent of receivables allowance method, what is the estimated percentage of uncollectible accounts for each company?
 

Explanation:

a.

Accounts receivable turnover:

Calculate net accounts receivables:

Bergstrom: $56,800 – $3,048 = $53,752

Sineann: $80,200 – $2,756 = $77,444

   

Company	Sales			÷	Accounts Receivable
Bergstrom	$	606,960		÷	$	53,752		=		11.3	times
Sineann	$	887,100		÷	$	77,444		=		11.5	times

b.

Average days to collect accounts receivable:

Company	365	÷	Acct. Rec. Turnover
Bergstrom	365	÷	11.3	=	32	days to collect
Sineann	365	÷	11.5	=	32	days to collect

*rounded to the next whole number of days

c.

Bergstrom:	$	3,048		÷	$	56,800		=		5	%
Sineann:	$	2,756		÷	$	80,200		=		3	%

Thank you!