Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
7th Edition
ISBN: 9781260581256
Author: John Wild
Publisher: McGraw-Hill Education
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Chapter 6, Problem 2AA
To determine

Inventory:

Inventory is an asset of the company which includes work in progress, raw material and finished goods which are in the process of making or already ready to be sold in the market. In other words inventory is goods which are unsold and would be sold.

To compute: Day’s sales uncollected as of A Company and G Company and analyze.

Expert Solution & Answer
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Explanation of Solution

Day’s sales uncollected imply how much days a company takes to collect its accounts receivables.

Formula to calculate day’s sales uncollected is

  Day'ssalesuncollected=( AccountsReceivable NetSales)×365

Day’s sales uncollected for A Company

Day’s sales uncollected in current year:

Given info,

Accounts Receivable is $16,849.

Net Sales is $233,715.

Substitute $16,849 for accounts receivable, and $233,715 for net sales in the above formula,

  Day'ssalesuncollected=( $16,849 $233,715)×365=0.0720×365=26.31

Day’s sales uncollected in prior year:

Given info,

Accounts Receivable is $17,460.

Net Sales is $182,795.

Substitute $17,460 for accounts receivable, and $182,795 for net sales in the above formula,

  Day'ssalesuncollected=( $17,460 $182,795)×365=0.095×365=34.86

Hence, day’s sales uncollected are accounted for prior year is 34.86 days and for current year is 26.31 days .

(b) Day’s sales uncollected for G Company

Day’s sales uncollected in current year:

Given info,

Accounts Receivable is $11,556.

Net Sales is $74,989.

Substitute $11,556 for accounts receivable, and $74,989 for net sales in the above formula,

  Day'ssalesuncollected=( $11,556 $74,989)×365=0.154×365=56.24

Day’s sales uncollected in prior year:

Given info,

Accounts Receivable is $9,383.

Net Sales is $66,001.

Substitute $9,383 for accounts receivable, and $66,001 for net sales in the above formula,

  Day'ssalesuncollected=( $9,383 $66,001)×365=0.142×365=51.89

Thus, day’s sales uncollected are accounted for 51.89 days.

Hence, day’s sales uncollected are accounted for prior year is 51.89 days and for current year is 56.24 days .

Review about trend of the companies:

  • It is concluded that A Company has improved slightly in order to collect its receivables as now it would take 8.55 (34.86-26.31) less days to collect receivables.
  • It is concluded that G Company has not improved in order to collect its receivables because now it would take 4.36 (56.25-51.89) more days to collect receivables.

Company with largest percentage change:

  • It is ascertained that the day’s sales uncollected for A Company increased by 8.4% whereas the day’s sales uncollected for G Company decreased by 24.5%
  • It is concluded that G Company has not managed its number of day’s sales uncollected as compared to previous year while A Company is much efficient than G Company.

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Students have asked these similar questions
ht = ences X On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash withdrawals by owner Consulting revenue Salaries expense Cash $ 8,450 Accounts receivable 16,950 Office supplies 4,080 Rent expense Land 46,020 Office equipment 18,860 Telephone expense Accounts payable 9,280 Owner investments 84,920 Miscellaneous expenses $ 2,930 16,950 4,420 7,900 860 680 Exercise 1-18 (Algo) Preparing an income statement LO P2 Using the above information prepare a December income statement for the business. ERNST CONSULTING Income Statement Revenues Rent expense Salaries expense Telephone expense Total revenues $ 4,420 7,900 860 $ SA Assets Cash 8,450 Accounts receivable 16,950 Office supplies 4,080 Land 46,020 Office equipment 18,860 navable 9,280 13,180 5 11 of 14 Next >
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