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Concept explainers
(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 accounts receivable turnover for Year 2 and Year 1.
(b)
To calculate: The day’s sales in receivables at the end of Year 2 and Year 1.
(c)
To conclude: The Efficiency of Corporation C’s management in collecting accounts receivables.
(d)
To ascertain: Whether Corporation C’s accounts receivable turnover ratio would be higher or lower than a typical manufacturing company.
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Chapter 8 Solutions
Financial & Managerial Accounting
- Accounts Receivable Analysis Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Xavier Lestrade Sales $219,000 $306,600 Credit card receivables-beginning 40,352 63,501 Credit card receivables-ending 33,688 48,891 a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round answers to one decimal place. Assume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in receivables fill in the blank 3 days fill in the blank 4 days b. Xavier’s accounts receivable turnover is than Lestrade’s. The number of days' sales in receivables is for Xavier than for Lestrade. These…arrow_forwardAccounts Receivable Analysis Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Хavier Lestrade Sales $310,250 $434,350 Credit card receivables-beginning 46,788 49,619 Credit card receivables-ending 39,062 38,203 a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round answers to one decimal place. ASsume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover 2. Number of days' sales in receivables days days b. Xavier's accounts receivable turnover is than Lestrade's. The number of days' sales in receivables is for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables quickly than Lestrade. As a result, it takes Xavier time to collect…arrow_forwardThe Campbell Soup Company manufactures and markets food products throughout the world. The following sales and receivable data (in millions) were reported by Campbell Soup for two recent years: Year 2 Year 1 $8,082 $8,268 Sales 670 Accounts receivable 647 Assume that the accounts receivable (in thousands) were $635 million at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round average ac- counts receivable to one decimal place and accounts receivable turnover to two decimal places. b. 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 these analyses regarding Campbell's C. efficiency in collecting receivables?arrow_forward
- Accounts Receivable Turnover and Days' Sales in Receivables Classic Company designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The company's products include such brands as Polo by Classic, Classic Purple Label, Classic, Polo Jeans Co., and Chaps. Polo Classic reported the following for two recent years: For the Period Ending Sales $7,408,770 715,400 Accounts receivable Assume that accounts receivable were $657,000 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round your answers to two decimal places. Year 2: Year 1: Year 2 Year 2: Year 1 Year 1: $7,320,075 737,300 b. Compute the days' sales in receivables for Year 2 and Year 1. Round your final answers to one decimal place. Use 365 days per year in your calculations. days daysarrow_forwardRosco Co. manufactures and markets food products throughout the world. The following sales and receivable data were reported by Rosco for two recent years: Year 2 Year 1 Sales $4,126,325 $3,918,640 Accounts receivable 489,100 481,800 Assume that the accounts receivable were $408,800 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place. Year 2: fill in the blank 1 Year 1: fill in the blank 2 b. Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days per year in your calculations. Round to one decimal place. Year 2: fill in the blank 3 days Year 1: fill in the blank 4 daysarrow_forwardAnalyzing Accounts Receivable The following information is taken from the annual report of The Coca-Cola Company: (amounts in millions) Year 1 Year 2 Net sales $45,998 $44,294 Accounts receivable (net) 4,466 3,941 Calculate the receivable turnover ratio and the receivable collection period for Year 1 and Year 2. Round your answer to two decimal places. Year 1 Year 2 Receivable turnover ratio Receivable collection period 10.3 35.44 days Additional cash flow $ How much additional cash flow from operations could Coca-Cola generate in Year 2 if it could reduce its receivable collection period to just 30 days? Round your final answer to the nearest million dollar. Year 2 11.24 32.47 days 0x millionarrow_forward
- Analyzing Accounts ReceivableThe following information is taken from the annual report of Coca-Cola Enterprises, Inc.: (amounts in millions) Year 1 Year 2 Net sales $19,058 $19,606 Accounts receivable (net) 1,884 1,802 Calculate the receivable turnover ratio and the receivable collection period for Year 1 and Year 2. Round your answer to two decimal places. Year 1 Year 2 Receivable turnover ratio Receivable collection period days days How much additional cash flow from operations could Coca-Cola Enterprises generate in Year 2 if it could reduce its receivable collection period to just 30 days?Round your final answer to the nearest million dollar. Year 2 Additional cash flow millionarrow_forwardAccounts receivable analysis Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): A. Determine the (1) accounts receivable turnover and (2) the number of days sales in receivables for both companies. Round to one decimal place. B. Compare the two companies with regard to their credit card policies.arrow_forwardPolo 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_forward
- 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 607,000 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. 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_forwardLast year, Tobys Hats had net sales of 45,000,000 and cost of goods sold of 29,000,000. Tobys had the following balances: Refer to the information for Tobys on the previous page. Required: Note: Round answers to one decimal place. 1. Calculate the average accounts receivable. 2. Calculate the accounts receivable turnover ratio. 3. Calculate the accounts receivable turnover in days.arrow_forwardAccounts Receivable Balance Hart Inc. began the year with $315,700 of accounts receivable. During the year, Hart sold a considerable amount of merchandise on credit and collected $2,427,000 of its credit sales. At the end of the year, the accounts receivable balance is $16,800 lower than the beginning balance. Required: Calculate the amount of credit sales during the period.arrow_forward
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