Question

Presented below is information for Sheffield Company. 1. Beginning of-the year Accounts Receivable balance was $21,500. Net sales (all on account) for the year were $109,100. Sheffield does not offer cash discounts 2. Collections on accounts receivable during the year were $88,900. 3. Prepare (summary) journal entries to record the items noted above. (If no entry is required, select "No Entry" for the account titles and enter 0for the amounts Credit account tities are automatically indented when the amount is entered. Do not indent manually) No. Account Titles and Explanation Debit Credit 1 2. 3. eTextbook and Media List of Accounts Compute Sheffield's accounts receivable turnover and days to collect receivables for the year. The company does not believe it will have any bad debts. (Round answers to 2 decimal places, eg 4.57 Accounts receivable turnover times Days to collect accounts receivable days eTextbook and Media List of Accounts Use the turnover ratio computed in (b)to analyze Sheffield's liquidity. The turnover ratio last year was 6.2 trend in liquidity This is a eTextbook and Media

Answer 1

Ans 1:

No. Account Title and Explanation. Debit. Credit

1. No Entry. 0. 0

2. Accounts Receivable. 109,100

Sales. 109100 (Being sales made on credit)

3. Cash. 88900   

Accounts Receivable. 88900

(Being collection made against the credit sale)

Ans 2:

I)

Closing Accounts Receivable=opening+sales-collection

=$(21500+109100-88900)=$41,700.

Average Accounts Receivable=(opening value+closing value)/2=(21500+41700)/2=$31600

Accounts Receivable Turnover=Net Credit sales/Average Accounts Receivable.

=(109100/31600)= 3.45 times (Ans.)

II)

Days to collect accounts receivable=365/Accounts Receivable Turnover = (365/3.45) days. = 105.80 days (Ans.)

Ans 3

This is a positive trend in the liquidity.