century 21 accounting © 2009 south-western, cengage learning lesson 7-3 accounts receivable...
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-3LESSON 7-3
Accounts Receivable Turnover Ratio
Accounts receivable turnover ratioAverage number of days for payment
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Chapter 7 ObjectivesChapter 7 ObjectivesAccounting for Uncollectible AccountsAccounting for Uncollectible Accounts
After studying Chapter 7, you will be able to:Define accounting terms related to uncollectible accounts.Identify accounting concepts and practices related to uncollectible accounts.Calculate and record estimated uncollectible accounts expense using the direct write-off method.Calculate and record estimated uncollectible accounts expense using the allowance method.Calculate and analyze accounts receivable turnover ratios.
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LESSON 7-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Lesson 7-3Lesson 7-3
accounts receivable turnover ratio: the number of times the average amount of accounts receivable is collected during a specified period
book value of accounts receivable: the difference between the balance of accounts receivable and its contra account, allowance for uncollectible accounts
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LESSON 7-3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
Beginning $50,329.14 $1,416.83 $48,912.31– =
Ending $45,462.79 $1,363.88 $44,098.91– =
Total AccountsReceivable
Allowance forUncollectible
Accounts
Book Valueof AccountsReceivable
– =
CALCULATING THE ACCOUNTS CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIORECEIVABLE TURNOVER RATIO page 211
Compute the beginning and ending book value.11
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
($48,912.31 $44,098.91) $46,505.61+ = 2
Beginning BookValue ofAccounts
Receivable
Ending BookValue ofAccounts
Receivable
Average BookValue ofAccounts
Receivable
+ = 2
CALCULATING THE ACCOUNTS CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIORECEIVABLE TURNOVER RATIO page 211
Compute the average book value.22
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
$330,312.85 $46,505.61 7.1 times =
Net Saleson Account
Average BookValue of
Accounts Receivable
AccountsReceivable
Turnover Ratio =
CALCULATING THE ACCOUNTS CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIORECEIVABLE TURNOVER RATIO page 211
Compute the accounts receivable turnover.33
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
365 7.1 51 =
Days inYear
Accounts ReceivableTurnover Ratio
Average Number of Days
for Payment =
CALCULATING THE ACCOUNTS CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIORECEIVABLE TURNOVER RATIO page 211
Compute the average number of days for payment.44
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
ANALYZING ACCOUNTS RECEIVABLE ANALYZING ACCOUNTS RECEIVABLE TURNOVER RATIOSTURNOVER RATIOS page 212
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 7-3
DEFINE TERMS REVIEWDEFINE TERMS REVIEWIn QuizletIn Quizlet
accounts receivable turnover ratio book value of accounts receivable
page 213
Edit this set: Chapter 7 AdvAcc (then SAVE)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Exit Ticket for today:Exit Ticket for today:Audit Your Understanding 7-3Audit Your Understanding 7-3
1. What is the formula for calculating the accounts receivable turnover ratio?
2. How would you interpret the situation of a business that desires an accounts receivable turnover ratio of 12.0 times but actually has a turnover ratio of 6.0 times.
3. How can extremely restrictive credit terms have a negative impact on a business?
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LESSON 7-3
In a Word Document, SaveAS: Chapter7-3AYUYourNameAnd drop in my Inbox today!
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Complete the following assignments for Complete the following assignments for Chapter 7-3 todayChapter 7-3 today
Define Terms Review on page 213. Answer Audit Your Understanding questions on page
213. Complete Work Together 7-3 on Aplia – page 213. Complete On Your Own 7-3 on Aplia – page 213. Complete Application Problem 7-5 on Aplia – page
216. Complete Application Problem 7-6 on Aplia – page
217.
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LESSON 7-3