Examine the following extracts from Blake Co.’s income statement and balance sheet for the previous three years.

You also read in the financial press that Blake Co. sold $2,000 of its accounts receivable in year 3.
Required

a. Calculate the ratio of accounts receivable as a percentage of sales for years 1, 2, and 3 without taking into account what you read about the sale of Blake’s accounts receivable.

b. Calculate the ratio of accounts receivable as a percentage of sales for years 1, 2, and 3 after adjusting for the sale of Blake’s accounts receivable.

Transcribed Image Text:

Income Statement Year 1 Year 2 Year 3 S $ $ Sales 6,000 9,000 12,000 Operating Income 1,500 2,100 2,400 Balance Sheet Year 1 Year 2 Year 3 S $ $ Accounts receivable 1,200 1,800 2,400