Question

Accounts Receivable AnalysisThe following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45.20Y3 20Y2 20Y1Accounts receivable, end of year $725,000 $650,000 $600,000 Sales on account 5,637,500 4,687,500 a. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.20Y3 20Y21. Accounts receivable turnover _____ _____ 2. Number of days' sales in receivables _____ days _____ daysb. The collection of accounts receivable has_____ . This can be seen in both the_____ in accounts receivable turnover and the______ in the collection period.

Answer 1

To determine the accounts receivable turnover, divide the net credit sales by the average accounts receivable. For 20Y2, the accounts receivable turnover is 4.68 times. The number of days' sales in receivables for 20Y2 is 78.09 days. The collection of accounts receivable has improved as seen in the accounts receivable turnover increase and the collection period decrease.

Step-by-step explanation:

To determine the accounts receivable turnover, divide the net credit sales by the average accounts receivable. For 20Y2, the net credit sales is $4,687,500 and the average accounts receivable is $(650,000 + 725,000)/2 = $687,500. Therefore, the accounts receivable turnover for 20Y2 is 4.68 times. For 20Y3, the net credit sales is $5,637,500 and the average accounts receivable is $(725,000 + 650,000)/2 = $687,500. Therefore, the accounts receivable turnover for 20Y3 is 5.17 times.

To determine the number of days' sales in receivables, divide 365 days by the accounts receivable turnover. For 20Y2, the number of days' sales in receivables is 365/4.68 = 78.09 days. For 20Y3, the number of days' sales in receivables is 365/5.17 = 70.66 days.

The collection of accounts receivable has improved. This can be seen in both the increase in accounts receivable turnover and the decrease in the collection period.

Answer 2

Accounts receivable turnover 2013 2,05 2012 1,875

Number of days' sales in receivables 178 daysin 2013 194 days in 2012

The collection of accounts receivable has high turnover . This can be seen in both the times per year in accounts receivable turnover and the average number of days in the collection period.

Step-by-step explanation:

Account receiv Sales

2013 725000 5637500 7,775862069

2012 650000 4687500 7,211538462

2011 600000

Turnover Ratio= net credit sales

Avergae account receivable

2012 = 4687500/(600000+650000)/2

1,875

2013 = 5637500/(650000+725000)/2

2,05

Receivable turnover in days = 365 / Receivable turnover ratio

2012 194,6666667

2013 178,0487805