Question

question：(a) Horizontally analyze the financial data in Exercise 17-9. (b) Calculate how many days it took Sigmon Inc. to collect its recieivables (i.e. Sigmon's average collection period) in 20Y3. Show and briefly explain your work.

EX 17-9 The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45. Accounts receivable analysis OBJ. 3 ceivable .2 20Y3 20Y2 20Y1 Accounts receivable, end of year Sales on account 725,000650,000 4687,500 $600,000 5,637,500

Answer 1

Solution

Horizontal Analysis of Comparative Income Statements (Partial)
			Increase (Decrease)
	20Y3	20Y2	Amount	Percentage
Sales	$   56,37,500.00	$ 46,87,500.00	$   9,50,000.00	20.27%

.

Horizontal Analysis of Balance sheet(Partial)
			Increase (Decrease)
	20Y3	20Y2	Amount	Percemtage
Accounts Receivables	$      7,25,000.00	$    6,50,000.00	$       75,000.00	11.54%

Days accounts receivables outstanding =

Accounts Receivables

/

(Total Credit sales/Number of Days)

Days accounts receivables outstanding =

$        7,25,000.00

/

(5637500/365)

Days accounts receivables outstanding =

46.94 Days

The Accounts receivables outstanding is more than total days allowed to receivables. The company needs to reduce days sales outstanding or Accounts receivables outstanding