Suppose the 2017 financial statements of 3M Company report net sales of $21.7 billion. Accounts receivable (net) are $3.40 billion at the beginning of the year and $3.42 billion at the end of the year. 1. Compute 3M’s receivable turnover.
2. Compute 3M’s average collection period for accounts receivable in days.

A.Receivable turnover 6.36

B. Average collection period 57.38

Explanation:

A. Computation of 3M Company’s receivable turnover

Using this formula

Receivable turnover= Net annual credit sale / (beginning accounts receivable+ending accounts receivable)/2

Let plug in the formula

Receivable turnover=21.7/ ((3.40 +3.42)/2)

Receivable turnover= 21.7/(6.82/2)

Receivable turnover=21.7/3.41

Receivable turnover=6.36

B. Computation of 3M Company’s average collection period for accounts receivable in days

Using this formula

Average collection period = Number of days in a year/Receivable Turnover

Let plug in the formula

Average collection period=365 /6.36

Average collection period= 57.38

Therefore Receivable turnover will be 6.36 and the Average collection period will be 57.38.

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explanation: