Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Xavier LestradeSales $8,500,000 $4,585,000Credit card receivables—beginning 820,000 600,000Credit card receviables—ending 880,000 710,000a. Determine the (1) accounts receivable turnover and (2) the number of days’ sales in receivables for both companies. Round to one decimal place.b. Compare the two companies with regard to their credit card policies.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions):
Xavier Lestrade
Sales $8,500,000 $4,585,000
Credit card receivables—beginning 820,000 600,000
Credit card receviables—ending 880,000 710,000
a. Determine the (1) accounts receivable turnover and (2) the number of days’ sales in receivables for both companies. Round to one decimal place.
b. Compare the two companies with regard to their credit card policies.
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