Question

The following data are taken from the financial statements Average accounts receivable (net) Accounts receivable (net), end of year Sales on account Current Year Preceding Year $123.000 $95.000 129,012 87,516 950.000 825.000 a. Assuming that credit terms on all sales are 1/45, determine for each year (1) the accounts receivable turnover and (2) the number of days' sales in receivables Round intermediate calculation to whol number and final answers to two decimal place. 1. The accounts receivable turnover Current Year Preceding Year 2. The number of days' sales in receivables Assume a 365-day van Current Year Preceding Year b. Comment on any significant trends revealed by the data during the current year, an) trend. The accounts receivable turnover has 7. Based on credit terms of 1/45. the current year turnover indicates that receivables are not being collected within the 45-day period. Likewise, the number of day sales in recevables indicates an)

Answer 1

average accounts receivables sales on account end of the year receivables net current year 123000 950000 129012 preceding year 90000 825000 87516 1 Accounts receivables turnover current year 7.72 preceding year 9.17 2 days sales in receivables current year preceding year 47.26 39.82 accounts receivables turnover=sales/ average receivables days sales in receivables = average receivables/ sales*365 b sales increased during the current year a favorable trend.The accounts receivables turnover has decreased based on the credit terms n/45 the current year turnover indicates that increased accounts receivables are not being collected within 45 day period likewise number of days sales in receivables indicates a unfaorable trend