Question: Bailey Corp. significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $38,000 and ending receivables of $191,000. Credit sales were $380,000.
Instructions: (a) Determine cash collections during the period.
(b) Discuss how your findings in part (a) would affect Bailey Corp.'s quality of earnings ratio. (Do not compute.)
(c) What concerns might you have regarding Bailey's accounting?