Question

20Y9

Answer 1

Answer:

                                                           20Y9           20Y8

a. Accounts receivable turnover =    13.4x            11.7x

b. Days' sales in receivable =         27.2 days    31.2 days

c. The changes in the accounts receivable turnover and days' sales in receivables from 20Y8 to 20Y9 are favorable.

Explanation:

a) Data and Calculations:

                                     20Y9              20Y8

Sales                   $8,375,000  $7,078,500

Accounts receivable:

Beginning of year   630,000      580,000    $1,210,000

End of year             620,000      630,000    $1,250,000

Average accounts

receivable =       $625,000   $605,000

                   ($1,250,000/2)    ($1,210,000/2)

a. Accounts receivable turnover = Sales/Average accounts receivable

=                           13.4x            11.7x

= ($8,375,000/$625,000)     ($7,078,500/$605,000)

b. Days' sales in receivable = 365/Accounts receivable turnover

=                           27.2 days    31.2 days

=                          (365/13.4)    (365/11.7)

c. The changes in the accounts receivable turnover and days' sales in receivables from 20Y8 to 20Y9 are favorable.