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 $ 27,437 90,000 115,000 8,836 214,637 $ 455, 910 $ 32,071 $ 32,425 62,300 50,400 84,000 60,000 8,419 3,603 206,236 174,672 $ 393, 026 $ 321, 100 $ 115,792 $ 67,750 $ 43,233 87,425 162,500 90,193 $ 455, 910 92,204 72,382 162,500 162,500 70,572 42,985 $ 393, 026 $ 321,100 The company's income statements for the Current Year and 1 Year Ago, follow. Assume that all sales are on credit: 1 Yr go $ 467,701 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 $ 592,683 $ 361,537 183,732 10,076 7,705 563,050 $ 29,633 $ 304,006 118,328 10,757 7,016 440, 107 $ 27,594 $ 1.82 $ 1.70

Answer 1

1-a
Days Sales Uncollected = Accounts Receivable / Net Sales x 365
Current Year = $90,000 / 592683 x 365 = 55.425 days
1 yr ago = $62300 / $467,701 x 365 = 48.619 days

1-b

This ratio worsened over the year since Days Sales Uncollected increased.