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(a)
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 average accounts receivable turnover of Company H and Incorporation L.
(b)
To identify: Whether Company H or Incorporation L has the higher average accounts receivable turnover ratio.
(c)
To explain: The reason for the difference in average accounts receivable turnover ratio between Company H and Incorporation L.
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Chapter 8 Solutions
Financial & Managerial Accounting
- Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places.arrow_forwardThe following selected information is taken from the financial statements of Arnn Company for its most recent year of operations: During the year, Arnn had net sales of 2.45 million. The cost of goods sold was 1.3 million. Required: Note: Round all answers to two decimal places. 1. Compute the current ratio. 2. Compute the quick or acid-test ratio. 3. Compute the accounts receivable turnover ratio. 4. Compute the accounts receivable turnover in days. 5. Compute the inventory turnover ratio. 6. Compute the inventory turnover in days.arrow_forwardFINANCIAL RATIOS Use the work sheet and financial statements prepared in Problem 15-8A. All sales are credit sales. The Accounts Receivable balance on January 1,20--, was 3,800. REQUIRED Prepare the following financial ratios: (a) Working capital (b) Current ratio (c) Quick ratio (d) Return on owners equity (e) Accounts receivable turnover and average number of days required to collect receivables (f) Inventory turnover and average number of days required to sell inventoryarrow_forward
- Mifflin Company reported the following for the current year: Net sales Cost of goods sold Beginning balance in accounts receivable Ending balance in accounts receivable Compute (a) accounts receivable turnover and (b) days' sales uncollected. Hint. Accounts receivable turnover uses average accounts receivable, and days' sales uncollected uses the ending balance in accounts receivable. Accounts Receivable Turnover Compute the accounts receivable turnover. Complete this question by entering your answers in the tabs below. Days Sales Uncollected Numerator: " $ 62,700 41,000 1 1 14,600 6,300 Denominator: Accounts Receivable Turnover Accounts Receivable Turnover Accounts receivable turnover timesarrow_forwardBased on the following data, what is the accounts receivable turnover? Sales on account during year $568,103 Cost of goods sold during year 173,112 Accounts receivable, beginning of year 40,327 Accounts receivable, end of year 46,019 Inventory, beginning of year 98,439 Inventory, end of year 105,146 a.5.4 b.14.1 c.13.2 d.3.3arrow_forwardAccarrow_forward
- Based on the following data, what is the accounts receivable turnover? Line Item Description Amount Sales on account during year $481,916 Cost of goods sold during year 220,075 Accounts receivable, beginning of year 44,464 Accounts receivable, end of year 52,698 Inventory, beginning of year 82,460 Inventory, end of year 110,155 a. 4.4 b. 9.9 c. 2.2 d. 10.8arrow_forward10. Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days' sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places. BEAN SUPERSTORE LEGUMES PLUS Comparative Balance Sheet December 31, 2017, 2018, and 2019 Comparative Balance Sheet December 31, 2017, 2018, and 2019 2019 2018 2017 2019 2018 2017 Assets Cash $345,600 67,000 145,830 100,465 $330,460 62,000 178,011 101,202 $300,000 59,000 155,205 103,085 $407,000 85,430 128,080 182,006 $386,450 82,670 40,036 23,400 $356,367 79,230 52,142 111,701 Accounts Receivable Inventory Equipment Total Assets $658,895 $671,673 $617,290 $802,516 $532,556 $599,440 Liabilities Salaries Payable Accounts Payable Notes Payable $ 91,455 $ 90,200 70,000 41,000 $ 88,563…arrow_forwardReview the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. Compute the number of days’ sales in receivables ratios for each company for 2018 and 2019. Determine which company is the better investment and why. Round answers to two decimal places.arrow_forward
- Provide Answer with calculation and explanationarrow_forwardThe descriptive sections of the annual report that provides insight into what the company does and the types of risks it lates is felt Select one: OA management discussion and analysis. B. the industry overview. OC. the audit opinion. D. notes to the financial statements. To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's Select one: A sales revenue. B. credit terms. OC. inventory turnover. D. accounts receivable balance. Two companies have an identical amount of current assets and current liabilities Donald Inc. has 40% of its current assets invested in whereas Mickey Corp. has 30% of its current assets invested in inventory Which of the following statements is true? Select one: OA. Donald will have the higher quick ratio. OB. Donald will have the higher current ratio. OC. The companies are equally liquid because their current ratios are the same OD. Donald is less liquid than Mickarrow_forwardMifflin Company reported the following for the current year: Net sales Cost of goods sold Beginning balance in accounts receivable Ending balance in accounts receivable Compute (a) accounts receivable turnover and (b) days' sales uncollected. Hint Accounts receivable turnover use receivable, and days' sales uncollected uses the ending balance in accounts receivable. Complete this question by entering your answers in the tabs below. Accounts Receivable Turnover Compute the days' sales uncollected. Days Sales Uncollected Numerator: 1 1 $ 62,700 41,000 14,600 6,300 Days' Sales Uncollected Denominator: xx Days = = = Days' Sales Uncollected Days' sales uncollected daysarrow_forward
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