Question

For the Period Ending Year 2 Year 1 Sales $4,673,460 $4,599,000 Accounts receivable 474,500 489,100 Assume that accounts receivable were $430,700 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place. Year 2: Year 1: 0.10 X b. Compute the days' sales in receivables for Year 2 and Year 1. Round to one decimal place. Use 365 days per year in your calculations. Year 2: days Year 1 days c. The change in the accounts receivable turnover from year 1 to year 2 indicates an) in the officiency of collecting accounts receivable and is a(n) change. The change in the days' sales in receivables is a(n) change

Answer 1

a.

For Year 1

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable)/2

= (430,700+489,100)/2

= $459,900

Accounts receivable turnover = Net credit sales/Average accounts receivables

= 4,599,000/459,900

= 10

Year 2

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable)/2

= (489,100+474,500)/2

= $481,800

Accounts receivable turnover = Net credit sales/Average accounts receivables

= 4,673,460/481,800

= 9.7

Year 2	9.7
Year 1	10

b.

For year 1

Days’ sales in receivables = 365/Accounts receivable turnover

= 365/10

= 36.5 days

For year 2

Days’ sales in receivables = 365/Accounts receivable turnover

=365/9.7

= 37.6 days

Year 2	37.6 days
Year 1	36.5 days

c.

The change in the accounts receivable turnover from year 1 to year 1 indicates Decrease in the efficiency of collection accounts receivable and is unfavorable change. The change in the days sales in receivables unfavorable change.

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