Blue, Inc. sells playground equipment to schools and municipalities. It mails invoices at the end of each
Question:
Blue, Inc. sells playground equipment to schools and municipalities. It mails invoices at the end of each month for all goods shipped during that month; credit terms are net 30 days. Sales and accounts receivable data for 2008, 2009, and 2010 follow:
Required:
1. Calculate the rates of increase in sales and in receivables during 2009 and 2010.
2. Do your calculations indicate any potential problems with Blue’s receivables?
3. If so, suggest a possible explanation for your findings and indicate what action, if any, would then be needed to bring Blue’s financial statements into conformity with GAAP.
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