E6-24 (Algo) Computing and Interpreting the Receivables Turnover Ratio L06-3 A recent annual report for NPS contained the following data Accounts receivable Less: Allowance for doubtful accounts Net accounts receivable Net sales (assume all on credit) Numerator Denominator Numerator Denominator (dollars in thousands) Current Year S 3,767,000 170,000 $ 35,297,000 Required: 1. Determine the receivables turnover ratio and average days sales in receivables for the current year (Use 365 days a year. Do not round intermediate calculations. Enter your answers in thousands not in dollars.) Receivables Turnover Ratio Previous Year $4,047,000 141,000 $4,504,000 Average Days Sales in Receivables 0 days
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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