32 Statement Presentation and _ Analy: Statement Presentation: > In the Balance sheet: short-term receivables are reported within the current assets section below short-term investments. Both: ~ the gross amount of receivables > and the allowance for doubtful accounts ( should be reported ) >In a multiple-step Income statement: > Bad Debt Expense and > Service Charge Expense (are reported as selling expenses in the operating expenses section ) Analysis anal 98 VR I Juesd ole o36 A Net Credit Sales Accounts receivable turnover = —————_—__________ _ times Average Net Accounts Receivable AR I Jwardd aojUl oro ' 5 365 The average collection period = 7—Sints Receivable turnover = days The average collection period should not greatly exceed the credit term period.33 Example: The following data exists for Gilkey Company. 2010 2009 Accounts Receivable $80,000 $70,000 Net Sales 500,000 410,000 1) Compute the receivables turnover ratio for 2010 2) Compute the average collection period for accounts receivable in days for 2010 Solution 1) Accounts receivables turnover = $500,000 + [($80,000 + $70,000)/2 ]= 6.66 times 2) Average collection period = 365 days + 6.66 = 54.8 days