Financial statement data for years ending December 31 for Chiro-Solutions Company are shown below.
2014 2013Net sales $2,912,000 $2,958,000Accounts receivable:Beginning of year 300,000 280,000End of year 340,000 300,000a. Determine the accounts receivable turnover for 2014 and 2013.b. Determine the number of days’ sales in receivables for 2014 and 2013. Round to one decimal place.c. Does the change in accounts receivable turnover and the number of days’ sales in receivables from 2013 to 2014 indicate a favorable or an unfavorable trend?Answer:
a. Accounts Receivable Turnover 2014 2013Net sales……………………………Accounts receivable:Beginning of year………………End of year………………………Average accts. receivable…………$2,912,000 $2,958,000$ 300,000 $ 280,000$ 340,000 $ 300,000$ 320,000 $ 290,000Accts. receivable turnover………[($300,000 + $340,000) ÷ 2]9.1[($280,000 + $300,000) ÷ 2]10.2($2,912,000 ÷ $320,000) ($2,958,000 ÷ $290,000)b. Number of Days’ Salesin Receivables 2014 2013Net sales………………………………Average daily sales…………………Average accts. receivable…………Number of days’ sales inreceivables…………………………$2,912,000 $2,958,000$ 7,978.1 $ 8,104.1($2,912,000 ÷ 365 days) ($2,958,000 ÷ 365 days)$ 320,000 $ 290,000[($300,000 + $340,000) ÷ 2] [($280,000 + $300,000) ÷ 2]40.1 days 35.8 days($320,000 ÷ $7,978.1) ($290,000 ÷ $8,104.1)c. The decrease in the accounts receivable turnover from 10.2 to 9.1 and theincrease in the number of days’ sales in receivables from 35.8 days to 40.1days indicate unfavorable trends in the efficiency of collecting receivables.
Financial statement data for years ending December 31 for Robinhood Company are shown below.
2014 2013Net sales $7,906,000 $6,726,000Accounts receivable:Beginning of year 600,000 540,000End of year 580,000 600,000a. Determine the accounts receivable turnover for 2014 and 2013.b. Determine the number of days’ sales in receivables for 2014 and 2013. Round to one decimal place.c. Does the change in accounts receivable turnover and the number of days’ sales in receivables from 2013 to 2014 indicate a favorable or an unfavorable trend?Answer:
a. Accounts Receivable Turnover 2014 2013Net sales…………………………………Accounts receivable:Beginning of year…………………End of year…………………………Average accts. receivable……………Accts. receivable turnover……………$7,906,000 $6,726,000$ 600,000 $ 540,000$ 580,000 $ 600,000$ 590,000 $ 570,000[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]13.4 11.8($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)b. Number of Days’ Salesin Receivables 2014 2013Net sales…………………………………Average daily sales……………………Average accts. receivable……………Number of days’ sales inreceivables……………………………$7,906,000 $6,726,000$ 21,660.3 $ 18,427.4($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days)$ 590,000 $ 570,000[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]27.2 days 30.9 days($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 thedecrease in the number of days’ sales in receivables from 30.9 days to 27.2days indicate favorable trends in the efficiency of collecting receivables.
