Blue, Inc., sells playground equipment to schools and municipalities. It mails invoices at the end of each month for all goods shipped during that month; credit terms are net 30 days. Sales and accounts receivable data for 2017, 2018, and 2019 follow: Years Ending December 31, 2017: Sales: $1,785,980 Accounts Receivable at year-end: $220,189 2018: Sales: $1,839,559 Accounts Receivable at year-end: $227,896 2019: Sales: $1,986,724 Accounts Receivable at year-end: $267,094 Required: 1. Calculate the rates of increase in sales and in receviables during 2018 and 2019. 2. Do your calculations indicate any potential problems with Blue's receivables? 3. If so, suggest a possible explanation for your findings and indicate what action, if any, would then be needed to bring Blue's financial statements into conformity with GAAP.
Blue, Inc., sells playground equipment to schools and municipalities. It mails invoices at the end of each month for all goods shipped during that month; credit terms are net 30 days. Sales and
Years Ending December 31,
2017:
Sales: $1,785,980
Accounts Receivable at year-end: $220,189
2018:
Sales: $1,839,559
Accounts Receivable at year-end: $227,896
2019:
Sales: $1,986,724
Accounts Receivable at year-end: $267,094
Required:
1. Calculate the rates of increase in sales and in receviables during 2018 and 2019.
2. Do your calculations indicate any potential problems with Blue's receivables?
3. If so, suggest a possible explanation for your findings and indicate what action, if any, would then be needed to bring Blue's financial statements into conformity with GAAP.
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