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ID: 2688817 • Letter: #
Question
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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
$600,000
Total current liabilities
$350,000
$600,000
The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011.
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?
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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
$600,000
Total current liabilities
$350,000
$600,000
Explanation / Answer
Receiveable Turnover Ratio= Sales/Receivables for 2010, rt ratio=1200000/300000=4 hence,for 2011 rt ratio would be same as 2010 i.e, 4 therefore, investment in receivable is 1300000/4=325000
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