Question

Simon Company's year-end balance sheets follow Current Yr 1 Yr Ago 2 Yrs Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 27,141 89,109 111,500 8,740 210,135 $ 446,616 $ 31,725 $ 31,764 62,600 51,200 82,000 59,000 8,328 3,529 200, 361 166,007 $385,014 $ 311,500 $ 114,544 $ 67,019 $ 42,352 86,483 162,500 83,089 $ 446,616 91,210 78,907 162,500 162,500 64,285 35,741 $ 385,014 $ 311,500 The company's income statements for the Current Year and 1 Year Ago follow. Assume that all sales are on credit: For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income tax expense Total costs and expenses Net income Earnings per share Current Yr $ 580,601 $ 354, 167 179,986 9,870 7,548 551,571 $ 29,030 1 Yr Ago $ 458, 167 $ 297,809 115,916 10,538 6,873 431,136 $ 27,031 $ 1.79 $ $ 1.66 (1-a) Compute days' sales uncollected. (1-b) For each ratio, determine if it improved or worsened in the current year. Complete this question by entering your answers in the tabs below. Required 1A Required 1B CO < Prex 5 6 7 8 of 15 Next >

Answer 1

Days sales uncollected is calculated to determine the number of days taken by the company to collect the dues from debtors after the sales is effected. It is calculated by dividing accounts receivable by net sales of an accounting period and then it is multiplied with 365 to get the days uncollected.

1-a.

Days sales uncollected Choose Numerator [Choose Denominator * Days Accounts Receivable/ Net sales 365 Current Yr. $89,1001 $580,601 365 1 Yr. Ago $62,6001 $458,167 365 Х = Days sales uncollected Days sales uncollected 56 days 50 days Х =

Current year = ($89,100 / $580,601) × 365 = 56.013 = 56 days (rounded)

1 year ago = ($62,600 / $458,167) × 365 = 49.870 = 50 days (rounded)

1-b. It is worsened in the current year compared to 1 year ago.

Days sales uncollected was 50 days 1 year ago. Now it became 56 days.