Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 9, Problem 29E
(a)
To determine
Calculate the average accounts receivable turnover of Company CS and Incorporation AEO.
(b)
To determine
Identify whether Company CS or Incorporation AEO has the higher average accounts receivable turnover ratio.
(c)
To determine
Explain the reason for the difference in average accounts receivable turnover ratio for Company CS and Incorporation AEO.
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Use the data in Exercises 9-27 and 9-28 to analyze the accounts receivable turnover ratios of the Campbell Soup Company and American Eagle Outfitters, Inc.a. Compute the average accounts receivable turnover ratio for Campbell Soup and American Eagle for the years shown in Exercises 9-27 (See attachment) and 9-28 (See attachment).b. Does Campbelll Soup or American Eagle have the higher average accounts receivable turnover ratio?c. Explain why the average turnover ratios are different in (b).
Activity measures:
m. Calculate the accounts receivable turnover and number of days' sales in accounts receivable (based on a 365-day year) for the most
recent year.
n. Based on your analysis in m, do you believe that the company is doing an effective job at managing accounts receivable? What would you
estimate the industry averages to be for the accounts receivable turnover and number of days' sales in accounts receivable? Explain.
o. Calculate the inventory turnover and number of days' sales in inventory (based on a 365-day year) for the most recent year.
p. Based on your analysis in o, to what extent does the company need to be concerned about its inventory management policies? In
assessing the inventory management policies, would you be more interested in knowing current ratio or acid-test ratio information?
Explain.
What relationship exists between the average collection period and accounts receivable turnover?
Select one:
a. There is a direct and proportional relationship.
b. Both ratios are expressed in number of days.
c. As average collection period increases (decreases) the accounts receivable turnover decreases (increases).
d. Both ratios are expressed in number of times receivables are collected per year.
Chapter 9 Solutions
Financial Accounting
Ch. 9 - What are the three classifications of receivables?Ch. 9 - Dans Hardware is a small hardware store in the...Ch. 9 - What kind of an account (asset, liability, etc.)...Ch. 9 - After the accounts are adjusted and closed at the...Ch. 9 - A firm has consistently adjusted its allowance...Ch. 9 - Which of the two methods of estimating...Ch. 9 - Neptune Company issued a note receivable to...Ch. 9 - If a note provides for payment of principal of...Ch. 9 - The maker of a 240,000, 6%, 90-day note receivable...Ch. 9 - The note receivable dishonored in Discussion...
Ch. 9 - Journalize the following transactions, using the...Ch. 9 - Journalize the following transactions, using the...Ch. 9 - Journalize the following transactions, using the...Ch. 9 - Journalize the following transactions, using the...Ch. 9 - At the end of the current year, Accounts...Ch. 9 - At the end of the current year, Accounts...Ch. 9 - At the end of the current year, Accounts...Ch. 9 - At the end of the current year, Accounts...Ch. 9 - Lundquist Company received a 60-day, 9% note for...Ch. 9 - Prefix Supply Company received a 120-day, 8% note...Ch. 9 - Financial statement data for years ending December...Ch. 9 - Financial statement data for years ending December...Ch. 9 - Prob. 1ECh. 9 - MGM Resorts International owns and operates hotels...Ch. 9 - Journalize the following transactions in the...Ch. 9 - Journalize the following transactions in the...Ch. 9 - Quantum Solutions Company, a computer consulting...Ch. 9 - At the end of the current year, the accounts...Ch. 9 - Toot Auto Supply distributes new and used...Ch. 9 - The accounts receivable clerk for Kirchhoff...Ch. 9 - Kirchhoff Industries has a past history of...Ch. 9 - Using data in Exercise 9-9, assume that the...Ch. 9 - Performance Bike Co. is a wholesaler of motorcycle...Ch. 9 - Using the data in Exercise 9-11, assume that the...Ch. 9 - The following selected transactions were taken...Ch. 9 - The following selected transactions were taken...Ch. 9 - Prob. 15ECh. 9 - Using the data in Exercise 9-15, assume that...Ch. 9 - Casebolt Company wrote off the following accounts...Ch. 9 - Seaforth International wrote off the following...Ch. 9 - Determine the due date and the amount of interest...Ch. 9 - Spring Designs Decorators issued a 120-day, 4%...Ch. 9 - The series of five transactions recorded in the...Ch. 9 - The following selected transactions were completed...Ch. 9 - Journalize the following transactions of Trapper...Ch. 9 - Journalize the following transactions in the...Ch. 9 - List any errors you can find in the following...Ch. 9 - Ralph Lauren Corporation designs, markets, and...Ch. 9 - The Campbell Soup Company manufactures and markets...Ch. 9 - Prob. 28ECh. 9 - Prob. 29ECh. 9 - The following transactions were completed by Daws...Ch. 9 - Trophy Fish Company supplies flies and fishing...Ch. 9 - Call Systems Company, a telephone service and...Ch. 9 - Flush Mate Co. wholesales bathroom fixtures....Ch. 9 - The following data relate to notes receivable and...Ch. 9 - Prob. 6PACh. 9 - The following transactions were completed by The...Ch. 9 - Wig Creations Company supplies wigs and hair care...Ch. 9 - Prob. 3PBCh. 9 - Gen-X Ads Co. produces advertising videos. During...Ch. 9 - The following data relate to notes receivable and...Ch. 9 - Prob. 6PBCh. 9 - Bud Lighting Co. is a retailer of commercial and...Ch. 9 - Prob. 2CPCh. 9 - Prob. 4CPCh. 9 - For several years, Xtreme Co.s sales have been on...Ch. 9 - Best Buy is a specialty retailer of consumer...Ch. 9 - Apple Inc. designs, manufactures, and markets...Ch. 9 - Prob. 8CP
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- Which of the following is NOT a correct explanation for turnover ratios and periods calculated based on them? Select one: a. Receivables turnover indicates how many times a company circulates its receivables in a year. b. Average collection period is the number of days between the sale transaction and the collection of receivable from customer. c. Inventory turnover is the number of days between purchase of inventory and its sale to the customer. d. Average payment period is the number of days between the purchase transaction and the payment of payables to the suppliers. Clear my choicearrow_forwardIn constructing a pro forma balance sheet a manager can estimate the accounts receivable because: Select one: a. managers typically construct a pro forma income statement prior to the balance sheet. Thus, an estimate of sales has already been made and this is critical to estimating accounts receivable. O b. if the firm has already made an estimate of expected sales, then it can also estimate average daily sales. O c. if the firm maintains similar credit standards it can use the historical average age of accounts receivable to help estimate the anticipated average age of accounts receivable O d. if the firm has each piece of information as stated in the three choices above THEN they can estimate accounts receivable for the pro forma balance sheet..arrow_forwardHow do you calculate accounts receivable turnover? Select an answer: Take the beginning A/R balance, add the ending A/R balance, divide by two, then divide the result into sales revenue Take the beginning A/R balance, add the ending A/R balance, then divide the result into sales revenue divided by two Take the ending A/R balance, subtract the beginning A/R balance, then divide the result into sales revenue. Take the starting A/R balance, subtract the ending A/R balance, then divide the result into sales revenue divided by two.arrow_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_forwardPlease don't give image formatarrow_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.arrow_forward
- If you are told that LSJ Company turns its accounts receivable over every 33 days…this would represent an example of what type of analysis: a. Vertical Analysis b. Horizontal Analysis c. Ratio Analysisarrow_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_forwarda) Calculate Kopitiam Sdn Bud’s accounts receivable turnover ratio for Year 2 and Year 3. b) Calculate the number of days the average balance of receivables is outstanding before being converted into cash (turnover in days) for Year 2 and Year 3 c) What problem do you see with the company’s credit policy if the terms are net 30 days? Explain your answer.arrow_forward
- 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_forwardReview the select information for Liquor Plaza and Beer Buddies (industry competitors) and 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_forwardConsider again the example introduced in Section 4.5 of a credit card company that has a database of information provided by its customers when the customers apply for credit cards. An analyst has created a multiple regression model for which the dependent variable in the model is credit card charges accrued by a customer in the data set over the past year (y), and the independent variables are the customers annual household income (x1), number of members of the household (x2), and number of years of posthigh school education (x3). Figure 4.23 provides Excel output for a multiple regression model estimated using a data set the company created. a. Estimate the corresponding simple linear regression with the customers annual household income as the independent variable and credit card charges accrued by a customer over the past year as the dependent variable. Interpret the estimated relationship between the customers annual household income and credit card charges accrued over the past year. How much variation in credit card charges accrued by a customer over the past year does this simple linear regression model explain? b. Estimate the corresponding simple linear regression with the number of members in the customers household as the independent variable and credit card charges accrued by a customer over the past year as the dependent variable. Interpret the estimated relationship between the number of members in the customers household and credit card charges accrued over the past year. How much variation in credit card charges accrued by a customer over the past year does this simple linear regression model explain? c. Estimate the corresponding simple linear regression with the customers number of years of posthigh school education as the independent variable and credit card charges accrued by a customer over the past year as the dependent variable. Interpret the estimated relationship between the customers number of years of posthigh school education and credit card charges accrued over the past year. How much variation in credit card charges accrued by a customer over the past year does this simple linear regression model explain? d. Recall the multiple regression in Figure 4.23 with credit card charges accrued by a customer over the past year as the dependent variable and customers annual household income (x1), number of members of the household (x2), and number of years of posthigh school education (x3) as the independent variables. Do the estimated slopes differ substantially from the corresponding slopes that were estimated using simple linear regression in parts a, b, and c? What does this tell you about multicollinearity in the multiple regression model in Figure 4.23? e. Add the coefficients of determination for the simple linear regression in parts a, b, and c, and compare the result to the coefficient of determination for the multiple regression model in Figure 4.23. What does this tell you about multicollinearity in the multiple regression model in Figure 4.23? f. Add age, a dummy variable for gender, and a dummy variable for whether a customer has exceeded his or her credit limit in the past 12 months as independent variables to the multiple regression model in Figure 4.23. Code the dummy variable for gender as 1 if the customers gender is female and 0 if male, and code the dummy variable for whether a customer has exceeded his or her credit limit in the past 12 months as 1 if the customer has exceeded his or her credit limit in the past 12 months and 0 otherwise. Do these variables substantially improve the fit of your model?arrow_forward
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