The following data are taken from the financial statements of Outdoor Patio Inc. Terms of all sales are 2/10, n/60. Year 3Year 2Year 1Accounts receivable, end of year$ 900,000 $ 750,000 $600,000 Sales5,280,000 3,915,000 a. For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the days' sales in receivables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place. Year 3 Year 2 1. Accounts receivable turnover? ? 2. Number of days' sales in receivables?days?daysb. What conclusion can be drawn from these data concerning accounts receivable and credit policies?The collection of accounts receivable has (declined or improved) . This can be seen in the (decrease or increase) in accounts receivable turnover and the (increase or reduction) in the collection period. The company either became (more or less) aggressive in collecting accounts receivable or (more or less) restrictive in granting credit to customers in Year 3.

Answer a) Accounts receivable turnover ratio for Year 3=SalesAverage accounts…

Answered: The following data are taken from the…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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The following data are taken from the financial statements of Outdoor Patio Inc. Terms of all sales are 2/10, n/60.

	Year 3	Year 2	Year 1
Accounts receivable, end of year	$ 900,000		$ 750,000	$600,000
Sales	5,280,000		3,915,000

a. For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the days' sales in receivables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place.

	Year 3		Year 2
1. Accounts receivable turnover	?		?
2. Number of days' sales in receivables	?	days	?	days

b. What conclusion can be drawn from these data concerning accounts receivable and credit policies?
The collection of accounts receivable has (declined or improved) . This can be seen in the (decrease or increase) in accounts receivable turnover and the (increase or reduction) in the collection period. The company either became (more or less) aggressive in collecting accounts receivable or (more or less) restrictive in granting credit to customers in Year 3.

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