Route Canal Shipping Company has the following schedule for aging of accounts receivable:
Age of Receivables April 30,2010
Month of Sales Age of Acct. Amounts % of Amount Due
April 0-30 $105,000
March 31-60 60,000
February 61-90 90,000
January 91-120 45,000
Total receivables $300,000 100%
a. Fill in column (4) for each month.
b. If the firm had $1,440,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period.
c. If the firm likes to see its bills collected in 30 days, should it be satisfied with the average collection period?
d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?
e. What additional information does the aging schedule bring to the company that the average collection period may not show?