Question

The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45.

Answer 1

Answer:

1.                                                             20Y3             20Y2

A  Sales on account                          $5,637,500    $4,687,500

B Beginning Accounts receivables  $650,000      $600,000

C Ending accounts receivables        $725,000      $650,000

Average accounts receivables        $687,500      $625,000 [D=(B+C) / 2[

Accounts receivables Turnover        8.2                 7.5             [E=A/D]

No of days in sales receivables       44.5                48.7          [F=365 / E]

2. The collection of account receivables has INCREASED. This can be seen in both the INCREASE in accounts receivables turnover and the DECREASE in collection period.