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Concept explainers
(1)
Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In simple, it indicates the number of times the average amount of net accounts receivables has been collected during a particular period.
Average collection period:
Average collection period indicates the number of days taken by a business to collect its outstanding amount of accounts receivable on an average.
To calculate: The accounts receivable turnover for Year 2 and Year 1.
(2)
To calculate: The day’s sales in receivables at the end of Year 2 and Year 1.
(3)
To conclude: The Efficiency of Company H’s management in collecting accounts receivables.
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Chapter 8 Solutions
Financial & Managerial Accounting
- Polo Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The companys products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years: Assume that accounts receivable (in millions) were 486,200 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place. b. Compute the days sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. c. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?arrow_forwardMonster Beverage Corporation (MNST) develops, markets, and sells energy and other alternative beverage brands. Brown-Forman Corporation (BF.B) manufactures and sells a wide variety of spirit and wine beverages, such as Jack Daniels. The cost of goods sold and inventory were obtained from a recent annual report for both companies as follows (in millions): a. Determine the inventory turnover for both companies. Round all calculations to one decimal place. b. Determine the number of days sales in inventory for both companies. Use 365 days and round all calculations to one decimal place. c. Interpret the difference in inventory efficiency based on the companies respective product types.arrow_forwardRefer to the following data of Good Food Snack House (in the photo) _____22. What is their Cash Conversion Cycle if their Operating Cycle is 135 days?A. 104 days B. 105 days C. 106 days D. 107 days _____23. What is the Average Inventory of Good Food Snack House?A. Php 1,067,570 B. Php 1,607,057 C. Php 1,765,070 D. Php 5,017,657arrow_forward
- Apple Inc. designs, manufactures, and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Substantially all of the companys sales over the last five years are from sales of its Macs, iPods, iPads, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions): Assume that the accounts receivable (in millions) were 24,094 at the beginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. 2. Compute the days sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place. 3. What conclusions can be drawn from (1) and (2) regarding Apples efficiency in collecting receivables?arrow_forwardPlanet Ltd produces fridges and freezers, which are sold to retailers. The financial statements for the last three years are as follows: Income statements for the year ending 31st December 2021 2022 £000 £000 Revenue 336,250 427,038 Cost of sales (126,675) (190,012) Gross profit 209,575 237,025 Administration expenses (73,290) (95,795) Distribution expenses (14,678) (8,720) Operating profit 121,407 121,931 Interest (8,750) (11,250) Profit before tax 118,142 166,326 Tax (22,531) (22,136) Profit for the year 90,126 88,545 Statements of financial position as at 31st December 2021 2022 £000 £000 Non-current assets Property, plant and equipment 286,250 327,650 Current assets Inventories 37,000 28,000 Trade receivables 42,000 43,500 Cash 19,632 24,570 98,632 96,070 Total assets 384,882…arrow_forwardPlanet Ltd produces fridges and freezers, which are sold to retailers. The financial statements for the last three years are as follows: Income statements for the year ending 31st December 2021 2022 £000 £000 Revenue 336,250 427,038 Cost of sales (126,675) (190,012) Gross profit 209,575 237,025 Administration expenses (73,290) (95,795) Distribution expenses (14,678) (8,720) Operating profit 121,407 121,931 Interest (8,750) (11,250) Profit before tax 118,142 166,326 Tax (22,531) (22,136) Profit for the year 90,126 88,545 Statements of financial position as at 31st December 2021 2022 £000 £000 Non-current assets Property, plant and equipment 286,250 327,650 Current assets Inventories 37,000 28,000 Trade receivables 42,000 43,500 Cash 19,632 24,570 98,632 96,070 Total assets 384,882…arrow_forward
- Planet Ltd produces fridges and freezers, which are sold to retailers. The financial statements for the last three years are as follows: Income statements for the year ending 31st December 2021 2022 £000 £000 Revenue 336,250 427,038 Cost of sales (126,675) (190,012) Gross profit 209,575 237,025 Administration expenses (73,290) (95,795) Distribution expenses (14,678) (8,720) Operating profit 121,407 121,931 Interest (8,750) (11,250) Profit before tax 118,142 166,326 Tax (22,531) (22,136) Profit for the year 90,126 88,545 Statements of financial position as at 31st December 2021 2022 £000 £000 Non-current assets Property, plant and equipment 286,250 327,650 Current assets Inventories 37,000 28,000 Trade receivables 42,000 43,500 Cash 19,632 24,570 98,632 96,070 Total assets 384,882…arrow_forwardSilver Crafts, Inc. purchases and sells bracelets. The following information summarizes the company's operating activities for the year: Selling and Administrative Expenses $4,800 Purchases 158,000 Sales Revenue 790,000 Merchandise Inventory, January 1 2,300 Merchandise Inventory, December 31 38,550 If the company sold 7,400 bracelets during the year, how much is the unit cost for one bracelet? (Round your answer to the nearest cent.)arrow_forwardEddie's Bar and Restaurant Supplies expects its revenues and payments for the first part of the year to be: Sales Purchases January $14,000 $18,000 February 20,000 21,300 March 26,000 19,100 April 22,000 22,400 May 18,000 14,700 Seventy percent of the firm's sales are on credit. Past experience shows that 40 percent of accounts receivable are collected in the month after sale, and the remainder is collected in the second month after sale. Prepare a schedule of cash receipts for March, April and May. Eddie's pays its payments in the following month. Eddie's had a cash balance of $2,000 on March 1, which is also its minimum required cash balance. There is an outstanding loan of $2,000 on March 1. Prepare a cash budget for March, April, and May. Can you provide the excel formulas used so then I can do it myself and learn as well, please.arrow_forward
- Apple Inc. designs, manufactures, and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Substantially all of the company's sales over the last five years are from sales of its Macs, iPods, iPads, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions): Year 2 Year 1 Sales $233,715 $182,795 Accounts receivable at end of year 35,889 31,537 Assume that the accounts receivable (in millions) were $24,094 at the beginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. 2. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place. What conclusions can be drawn from (1) and (2) regarding Apple's efficiency 3. in collecting receivables?arrow_forwardSky Probe sells state-of-the-art telescopes to individuals and organizations interested in studying the solar system. At December 31 last year, the company’s inventory amounted to $250,000. Dur-ing the first week of January this year, the company made only one purchase and one sale. These transactions were as follows:Jan. 2 Sold one telescope costing $90,000 to Central State University for cash, $117,000.Jan. 5 Purchased merchandise on account from Lunar Optics, $50,000. Terms, net 30 days.a. Prepare journal entries to record these transactions assuming that Sky Probe uses the perpetualinventory system. Use separate entries to record the sales revenue and the cost of goods soldfor the sale on January 2.b. Compute the balance of the Inventory account on January 7. c. Prepare journal entries to record the two transactions, assuming that Sky Probe uses the peri-odic inventory system. d. Compute the cost of goods sold for the first week of January assuming use of a periodic inven-tory…arrow_forwardAccounts Receivable Balance XYZ Corp sells widgets to consumers for $20 each. Its beginning accounts receivable balance was $24,975, and it sold 12,376 widgets throughout the year. The total cash collections for the year amounted to $217,750. Required: Calculate the ending accounts receivable balance.arrow_forward
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