ABC sold $5 million worth of its product, wood blocks, during 2006. It sold all of its product on open credit accounts to its customers. For 2006, ABC collected 80% of its sales prior to year end. ABC uses the net method of recognizing Sales and Accounts Receivable, and provides terms to its best customers of 5/5, net 45. Of the total sales during the year, 60% were to its best customers with the remaining 40% to customers whose standard terms were full payment due within 30 days. Presuming that the collection rate between best customers and other customers is the same, calculate the ending Accounts Receivable balance as of December 31, 2006.
Standard terms is the payment within 30 days and the collection rate between best customers and other customers is the same. Thus the receivables collected in 30 days. So 30 ...
In this Solution, the author computes ABC's ending accounts receivable balance.