Chapter 8, Problem 8.4CP

(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 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 1 and Year 2.

(b)

To determine

To calculate: The day’s sales in receivables at the end of Year 1 and Year 2.

(c)

To determine

To conclude: The Efficiency of Incorporation A’s management in collecting accounts receivables.