Question

Accounts Receivable Analysis The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, 1/45. 2013 2012 2011 Accounts receivable, end of year $149,600 $157,000 $164,200 Sales on account 981,120 915,420 a. For 2012 and 2013, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables, Round answers to one decimal place. Assume a 365-day year. 2013 2012 X 5.7 ✓ 1. Accounts receivable turnover 2. Number of days' sales in receivables days days in the This can be seen in both the increase in accounts receivable turnover and the decrease b. The collection of accounts receivable has improved collection period

Answer 1

Account receivables turnover = Net credit sales Average account receivables Account receivables turnover 20Y3 Average account recivables = 149,600 + 157,000 2 11 153,300 Account receivables turnover = 6.40 981,120 153,300 Number of day's sales in receivables 365 Account receivables turnover II 57.03 days 365 6.4

Account receivables turnover 20Y2 Average account recivables 157,000 + 164,200 2 11 160,600 Account receivables turnover 5.70 915,420 = 160,600 Number of day's sales in receivables II 365 Account receivables turnover Number of day's sales in receivables 11 64.04 days 365 = 5.70

B. Collection period of account receivable is increase form 20Y2 - 5.70 to 20Y3 - 6.40.

number of days sales in account receivabels are also decrease form 20Y2 - 64.04 days to 20Y3 57.03 days

Lesser days in account receivables are increase the recovery of money faster.