a-1. The receivables turnover ratio is a-2. The company collecting cash from customers
a-1. The receivables turnover ratio is a-2. The company collecting cash from customers
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1

Transcribed Image Text:Cash
Accounts Receivable
Allowance for Uncollectible Accounts
Supplies
Notes Receivable (6%, due in 2 years)
Land
Accounts Payable
Common Stock
Retained Earnings
Totals
$26,100
14,700
3,600
15,000
80,000
$139,400
a-1. The receivables turnover ratio is
a-2. The company collecting cash from customers
January 20 Pay cash for salaries, $32,500.
January 22
Receive cash on accounts receivable, $81,000.
January 25 Pay cash on accounts payable, $6,600.
January 30 Pay cash for utilities during January, $14,800.
$1,400
During January 2024, the following transactions occur:
January 2 Provide services to customers for cash, $46,100.
January 6 Provide services to customers on account, $83,400.
January 15 Write off accounts receivable as uncollectible, $2,500. (Assume the company uses the allowance
method)
9,500
95,000
33,500
$139,400
Exercise 5-21 (Algo) Part 7
7. Analyze how well 3D Family Fireworks manages its receivables:
a-1. Calculate the receivables turnover ratio for the month of January. (Hint: For the numerator, use total services provided to
customers on account.) (Round your final answer to 1 decimal place.)
a-2. If the industry average of the receivables turnover ratios for the month of January is 4.4 times, is the company collecting cash from
customers more or less efficiently than other companies in the same industry?
b-1. Calculate the ratio of Allowance for Uncollectible Accounts to Accounts Receivable at the end of January. (Round percentage to 1
decimal place.)
b-2. Based on a comparison of this ratio to the same ratio at the beginning of January, does the company expect an improvement or
worsening in cash collections from customers on credit sales?
Expert Solution
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Step 1: Definition of receivable turnover ratio:
VIEWStep 2: Requirement a-1- Calculation of receivable turnover ratio:
VIEWStep 3: Requirement a-2- Efficiency of company in collecting cash:
VIEWStep 4: Requirement b-1- Calculation of allowance for uncollectible accounts to accounts receivable:
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