Collection period for receivables
Contemporary Media Sign Company sells on account. Recently, Contemporary reported the following figures:
|
2012 |
2011 |
|
|
Net sales |
$ 572,000 |
$ 600,000 |
|
Receivables at end of year |
38,700 |
46,100 |
Requirements
1. Compute Contemporary’s average collection period on receivables during 2012.
2. Suppose Contemporary’s normal credit terms for a sale on account are “2/10, net 30.” How well does Contemporary’s collection period compare to the company’s credit terms? Is this good or bad for Contemporary?