Accounts receivable turnover 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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

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Answer 1

Question

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

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The audited accounts of Lindsay Co. for year-end August 31, 2014 show a profit of $3,115,000 after charging the following: Depreciation 430,000 Rent 175,000 Legal fees 1,350,000 Audit fees 88,000 Donations 119,000 Bad debts 242,000 Foreign Travel 395,750 Interest payments 62,375 Other Information: Legal fees are as follows: Expenses in respect of recovery of debts, $585,000 Expenses related to the increase private share capital, $765,000 Lindsay Co. donated $65,500 to UTECH University and $53,500 to HELP, a private charity registered under the Charities Act. Bad debts are as follows: A loan of $76,130 to Derek Stan who failed to repayit. $63,017, owed by Simplicity Ltd. which was declared bankrupt. The balance is a percentage of receivables at year end which is deemed to be bad. Foreign travel expense included $268,210 for a vacation package for the marketing manager’s and his family plane tickets. The remaining amount was for a business trip to meet with potential suppliers.…

Answer 2

Question

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

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Answer 3

Question

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

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Answer 4

Question

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

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Answer 5

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

Answer 6

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

Answer 7

Chapter 8, Problem 8.4BYP

(a)

To determine

Accounts receivable turnover

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 other words, it indicates the number of times the average amount of net accounts receivables 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 and average collection period of Company S for the year 2014.

Answer 8

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

Answer 9

(b)

To determine

To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

Answer 10

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

Answer 11

(c)

To determine

To discuss: The expected change in answer (a), if Company S sells seasonal products.

Answer 12

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

Answer 13

(d)

To determine

To evaluate: The credit risk of Company S’s concentrated receivables.

Answer 14

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

Answer 15

(e)

To determine

To comment: On the informational value of Company S’s Note 19.

Answer 16

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Answer 17

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Answer 18

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Answer 19

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To find out: whether accounts receivable is a material component of Company S’s current assets in 2014.

To discuss: The expected change in answer (a), if Company S sells seasonal products.

To evaluate: The credit risk of Company S’s concentrated receivables.

To comment: On the informational value of Company S’s Note 19.

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