chapter 9-09

Accounts receivable analysis

The following data are taken from the financial statements of outdoor patio Inc. Terms of all sales are 2/10, n/60.

need #2 where the red x is...

Calcutator eBook Chapter 9 Exercises (Not Graded) Accounts Receivable Analysis The following data are taken from the financial statements of Outdoor Patio Inc. Terms of all sales are 2/10, n/60. Year 3 900,000 750,000 $600,000 5,280,000 3,915,000 Year 1 Year 2 Accounts recelvable, end of year Sales a. For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the days' sales in recelvables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place. Year 3 Year 2 1. Accounts receivable turnover 6.4 2. Number of davs sales in recavables57 days b. What conclusion can be drawn from these data concerning accounts recelvable and credit x days increase in accounts receivable turnover and the reductionin the collection of accounts receivable has improved V This can be seen in the i collection period. The company either became more aggressive restrictive in granting credit to customers in Year 3 i collecting accounts recelvable or more a-1), Divide net sales by average accounts recelvable, Average Accounts Recelvable-(Beginning Accounts Receivable Ending Accounts Recelivable) 2 (a 2). Divide average accounts receivable by average dalily sales on account. Average Accounts Receivable - (Beginning Accounts Receivable+ Ending Accounts Receivable) +2 Average Daily Sales on Account - Net Sales+365 days b. Remember that collecting accounts receivable as quickly as possible improves a company's liquidity