The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,3

Question

The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011.

2010 2011
Cash and marketable securities $50,000 $50,000
Accounts receivable 300,000 350,000
Inventories 350,000 500,000
Total current assets 700,000 900,000
Accounts payable 200,000 250,000
Bank loan 0 150,000
Accruals 150,000 200,000
Total current liabilities 350,000 600,000

a. Determine the receivables turnover in each year.
b. Calculate the average collection period for each year.
c. Based on the receivables turnover for 2010, estimate the investment in receivables if net sales were $1,300,000 in 2011.
d. How much of a change in the 2011 receivables occurred?

Explanation / Answer

a)Receivable Turnover =Net credit sales/Receivables for 2010 Receivable Turnover =1,200,000/300,000 =4 for 2011 Receivable Turnover =1,300,000/350,000 =3.71 b)for 2010 Average collection period=365/3.71 =98.27 days for 2011 Average collection period =365/4 =91.25 days c)Investment Receivables =1,300,000/4 =325,000 d)change in receivables =350,000-325,000 =$25,000

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