20Y9 | 20Y8
Sales $7,906,000 | $6,726,000
Accounts receivable:
Beginning of year 600,000 | 540,000
End of year 580,000 | 600,000
a. Determine the accounts receivable turnover for 20Y9 and 20Y8.
b. Determine the days’ sales in receivables for 20Y9 and 20Y8. Use 365 days and round to one decimal place.
c. Does the change in accounts receivable turnover and the days’ sales in receivables from 20Y8 to 20Y9 indicate a favorable or unfavorable change?
Answer:
a. Sales.......................................... Accounts receivable:
Beginning of year..................
End of year...........................
Average accts. receivable............
Accts. receivable turnover............ b. Sales.......................................... Average daily sales..................... Average accts. receivable............ Days’ sales in receivables............ $ 600,000 $ 540,000 Accounts Receivable Turnover 20Y9 20Y8 $7,906,000 $6,726,000 Days’ Sales in Receivables $7,906,000 $6,726,000 13.4 11.8 ($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)20Y9 27.2 days 30.9 days ($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days) $ 590,000 $ 570,000 [($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2] $ 580,000 $ 600,000 $ 590,000 $ 570,000 20Y8 $ 21,660.3 $ 18,427.4 ($590,000 ÷ $21,660.3) ($570,000 ÷ $18,427.4) c. The increase in the accounts receivable turnover from 11.8 to 13.4 and the decrease in the days’ sales in receivables from 30.9 days to 27.2 days indicate favorable changes in the efficiency of collecting receivables.