An evaluation of the books of Blair Supply

P3-16 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       Accounts 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 information affect the validity of your conclusion in part a? Explain.