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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883
Chapter 6, Problem 6.10.1MBA
Textbook Problem
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Accounts receivable and inventory turnover
The following data (in millions) were adapted from recent financial statements of International Paper Company (IP) and Wal-Mart Stores Inc. (WMT)

Chapter 6, Problem 6.10.1MBA, Accounts receivable and inventory turnover The following data (in millions) were adapted from recent

Compute the accounts receivable turnover for International Paper and Wal-Mart. Round to one decimal place.

To determine

Concept Introduction:

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

  Accounts receivable turnover ratio = Net credit SalesAverage accounts receivable 

To Calculate:

The Accounts receivable turnover for both companies

Explanation of Solution

The Accounts receivable turnovers for both companies are calculated as follows:

    $ in Millions International Paper Wal-Mart
    Sales (A) $ 23,617 $ 484,651
    Beginning Accounts Receivables (B)

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Survey of Accounting (Accounting I)
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