ACCTN101-25A (HAM) - Accounting for Management Course Materials & Test Answers | elearn.waikato.ac.nz

Use the information provided in the diagram. Given the company has accounts receivable of $5,000 in 20X1 and $8,000 in 20X2, compare the average collection period in days (assuming all sales were made on credit) in 20X1 and 20X2.

PC Hardware Limited
Income Statement for the year ended	20X1 ($)	20X2 ($)
Sales	56,000	67,000
Less Cost of Goods Sold	36,000	41,000
Gross Profit	20,000	26,000
Less Expenses	12,000	14,000
Net Profit before Interest and Tax	8,000	12,000
Less Interest	2,000	3,000
Net Profit before Tax	6,000	9,000
Less Tax	2,000	3,000
Net Profit after Tax	4,000	6,000

Average collection period has improved from 32.6 days in 20X1 to 43.6 days in 20X2

Average collection period has improved from 11.2 days in 20X1 to 8.4 days in 20X2

Average collection period has worsened from 11.2 days in 20X1 to 8.4 days in 20X2

Average collection period has worsened from 32.6 days in 20X1 to 43.6 days in 20X2

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ACCTN101-25A (HAM) - Accounting for Management

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