Answer:
a.
Accounts receivable turnover for Year 1: 8.2 times
Accounts receivable turnover for Year 2: 7.9 times
b.
The number of days' sales in receivables for year 1: 44.5 days
The number of days' sales in receivables for year 2: 46.2 days
Explanation:
a. The accounts receivable turnover is an efficiency ratio that measures how many times a company can collect its receivables or money owed by clients during the year.
Accounts receivable turnover is calculated by following formula:
Accounts Receivable Turnover = Net Credit Sales /Average Accounts Receivable
In there:
Average Accounts Receivable = (The beginning accounts receivable of the period balance + The ending accounts receivable of the period balance)/2
In Classic Company:
Average Accounts Receivable in year 1 = ($346,750+$390,550)/2 = $368,650
Average Accounts Receivable in year 2 = ($390,550+$375,950)/2=$383,250
Accounts receivable turnover for Year 1 = $3,022,930/$368,650=8.2 times
Accounts receivable turnover for Year 2 = $3,027,675/$383,250=7.9 times
b.
The number of days' sales in receivables = 365/Accounts receivable turnover ratio
For Year 1:
The number of days' sales in receivables = 365/8.2 = 44.5 days
For year 2:
The number of days' sales in receivables = 365/7.9 = 46.2 days
