E9-9 Accounts receivable analysis Obj 2 Va. Accounts receivable turnover, Year 3

Question

E9-9 Accounts receivable analysis Obj 2 Va. Accounts receivable turnover, Year 3 3.2 following data are taken from the financial statements of Amazing Technology Inc Terms The of all sales are 2/10, n/30 Year 3 Year 2 Year 1 Accounts receivable, end of year 350,000 290,000 $250,000 . For Years 2 and 3, determine () the accounts receivable turnover and (2) the number of b. What conclusions can be drawn from these data concerning accounts receivable and credit Net sales on account 4,224,000 3,456,000 days' sales in receivables. Round to nearest dollar and one decimal place. policies?

Explanation / Answer

Account receivable turnover = (net sales/average account receivable year 3 average account receivable (350,000+290,000)/2 320000 year 2 average account receivable (290,000+250000)/2 270000 1) Account receivable turnover year 3 4,224,000/320000 13.2 times year 2 3,456,000/270,000 12.8 times 2) Number of days in sales = 365/ account receivable turnover year 3 365/13.2 27.7 days year 2 365/12.8 28.5 days Accounts receivable turnover refers to the number of times it takes to collect account receivable,thus we see the company   collects receivable in timely manner and efficiently issue credit

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