Smiley Jams and Sir Tomato are two well-recognized brands at the dinner table. T
ID: 2550947 • Letter: S
Question
Smiley Jams and Sir Tomato are two well-recognized brands at the dinner table. To evaluate their ability to collect on credit sales, consider the following rounded information in their annual reports (amounts in millions). Smiley Jams 2012 Sir Tomato 2012 2013 2011 Fiscal Year Ended April 30: Net Sales Accounts Receivable Allowance for Doubtful Accounts 2013 2011 $6,100 325 2 5,690 $4,900 $11,700 $ 11,700 $11,500 1,062 12 836 10 360 356 887 Accounts Receivable, Net of Allowance 323 357 353 880 826 1,050 Required 1. Calculate the receivables turnover ratios and days to collect for Smiley Jams and Sir Tomato for the years ended April 30, 2013 and 2012. (Use 365 days in a year. Do not round intermediate calculations on Accounts Receivable Turnover Ratio. Round your answers to 1 decimal place Use final rounded answers from Accounts Receivable Turnover Ratio for Days to Collect ratio calculation.) 2013 2012 Smiley Jams Sir Tomato Smiley Jams Sir Tomato Receivables Turnover Ratio Days to Collect 2. Which of the companies is quicker to convert its receivables into cash in years 2012 and 2013? Smiley Jams Sir TomatoExplanation / Answer
Accounts receivable turnover = net sales/average account receivable days to Collect = 365/accounts receivable turnover smiley jams 2013 = 6100/{(323+357)/2} 6100/340 17.9 Daysto collect 365/17.9 20.3 Days 2012 = 5690/{(357+353)/2} 5690/355 16.0 Daysto collect 365/16 22.8 Days Sir Tomato 2013 = 11700/{(880+826)/2} 11700/853 13.7 Daysto collect 365/13.7 26.6 Days 2012 = 11700/{(853+1050)/2} 11700/951.5 12.3 Daysto collect 365/12.3 29.7 Days 2013 2012 Smiley Sir Smiley Sir Jams Tomato Jams Tomato Receivable turnover ratio 17.9 16 13.7 12.3 Days to collect 20.3 22.8 26.6 29.7 2) Smiley Jams
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