Here's the current assets section of the balance sheet for Cullumber Industries as of December 31, 2024, with amounts:

**CULLUMBER INDUSTRIES**  

**Balance Sheet (Partial)**  

**December 31, 2024**

**Current Assets:**

- Cash: $31,200

- Short-term investments: $39,000

- Accounts receivable: $546,000

- Less: Allowance for Doubtful Accounts: $(21,840)

- Interest receivable: $875

- Notes receivable, due April 10, 2025: $35,100

- Merchandise inventory: $253,500

- Prepaid insurance: $6,240

Calculate the receivables turnover and collection period. (Remember that this is the end of the first year of business.) (Round answers to 1 decimal place, e.g. 52.7. Use 365 days for calculation.)

Receivables turnover

times

Collection period

days


To calculate the **Receivables Turnover** and **Collection Period** for Cullumber Industries, follow these steps:

### Step 1: Calculate Net Accounts Receivable
Net Accounts Receivable is determined by subtracting the Allowance for Doubtful Accounts from the Accounts Receivable.

\[
\text{Net Accounts Receivable} = \text{Accounts Receivable} - \text{Allowance for Doubtful Accounts}
\]

\[
\text{Net Accounts Receivable} = \$546,000 - \$21,840 = \$524,160
\]

### Step 2: Determine Average Gross Accounts Receivable
Since this is the end of the first year of business, we'll assume that the beginning balance of accounts receivable was $0. Therefore, the average gross accounts receivable is:

\[
\text{Average Gross Accounts Receivable} = \frac{0 + \$546,000}{2} = \$273,000
\]

### Step 3: Determine Net Credit Sales
Assume that all sales are on credit since the problem doesn't specify otherwise.

\[
\text{Net Credit Sales} = \$546,000
\]

### Step 4: Calculate Receivables Turnover
The receivables turnover is calculated using the following formula:

\[
\text{Receivables Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Gross Accounts Receivable}}
\]

\[
\text{Receivables Turnover} = \frac{\$546,000}{\$273,000} = 2.0 \text{ times}
\]

### Step 5: Calculate Collection Period
The collection period is determined using the following formula:

\[
\text{Collection Period} = \frac{365 \text{ days}}{\text{Receivables Turnover}}
\]

\[
\text{Collection Period} = \frac{365}{2.0} = 182.5 \text{ days}
\]

### Final Answer:

- **Receivables Turnover:** 2.0 times
- **Collection Period:** 182.5 days

Would you like more details or have any questions about this calculation?

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Here are 8 related questions that might interest you:
1. What factors can lead to a lower receivables turnover ratio?
2. How does the collection period affect a company's working capital?
3. What are the consequences of a high collection period?
4. How can a company shorten its collection period?
5. What is the impact of uncollectible accounts on the receivables turnover ratio?
6. How does the receivables turnover ratio compare across different industries?
7. What additional information is needed to analyze a company's credit policy?
8. How does the collection period relate to cash flow management?

**Tip:** Monitoring the collection period regularly helps companies maintain optimal liquidity and avoid cash flow issues.

Learn how to calculate the receivables turnover and collection period for Cullumber Industries as of December 31, 2024. Understand the formulas used and their application, with step-by-step calculations provided. Round answers to 1 decimal place as per standard accounting practice.

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