An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.
Month of origin Amounts receivable
July ................ $ 3,875
August .............. 2,000
September ............ 34,025
October ............. 15,100
November ............ 52,000
December ............. 193,000
Year-end accounts receivable ...... $300,000
a. Use the year-end total to evaluate the firm’s collection system.
b. If 70% of the firm’s sales occur between July and December, would this affect the validity of your conclusion in part a? Explain.