Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 8.1ADM
Continuing Company Analysis–Amazon:
Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Sales and accounts receivable information for both companies for a recent period follows (in millions):
| Amazon | Best Buy | |
| Sales | $88,988 | $40,339 |
| Accounts receivable: | ||
| Beginning of year | 4,767 | 1,308 |
| End of year | 5,612 | 1,280 |
A. Determine the accounts receivable turnover for each company. (Round all calculations to one decimal place.)
B. Determine the number of days’ sales in receivables for each company. (Round all calculations to one decimal place.)
C. Evaluate the relative efficiency in collecting accounts receivables between the two companies.
D. What might explain this difference?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Accounts receivable turnover and days' sales in receivables
Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):
Sales: year 2: $39528 and year 1: $40339
Accounts receivable at end of year: year 2: 1162 and year 1: 1280
Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.
Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.
What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?
What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and…
Accounts receivable turnover and days’ sales in receivables Best Buy is a specialty retailer of consumer electronics, including personal computers,entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):
Year 2
Year1
Sales
$39,528
$40,339
Accounts receivable at end of year
1,162
1,280
Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.2. Compute the days’ sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.3. What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?4. What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and…
Accounts receivable turnover and days' sales in receivablesBest Buy is a specialty retailer of consumer electronics, includingpersonal computers, entertainment software, and appliances. Best Buyoperates retail stores in addition to the Best Buy, Media Play, On Cue, andMagnolia Hi-Fi websites. For two recent years, Best Buy reported thefollowing (in millions):
Year 2
Year 1
Sales
$39,528
$40,339
Accounts receivable at end of year
1,162
1,280
Assume that the accounts receivable (in millions) were $1,308 at thebeginning of fiscal Year 1.
1. Compute the accounts receivable turnover for Year 2 and Year 1.Round to two decimal places.2. Compute the days' sales in receivables at the end of Year 2 andYear 1. Use 365 days and round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding BestBuy's efficiency in collecting receivables?4. What assumption did we make about sales for the Best Buy ratiocomputations that might distort the ratios and therefore cause…
Chapter 8 Solutions
Corporate Financial Accounting
Ch. 8 - What are the three classifications of receivables?Ch. 8 - Dans Hardware is a small hardware store in the...Ch. 8 - What kind of an account (asset, liability, etc.)...Ch. 8 - After the accounts are adjusted and closed at the...Ch. 8 - A firm has consistently adjusted its allowance...Ch. 8 - Which of the two methods of estimating...Ch. 8 - Neptune Company issued a note receivable to...Ch. 8 - Prob. 8DQCh. 8 - The maker of a 240,000, 6%, 90-day note receivable...Ch. 8 - Prob. 10DQ
Ch. 8 - Direct write-off method Journalize the following...Ch. 8 - Allowance method Journalize the following...Ch. 8 - Percent of sales method At the end of the current...Ch. 8 - Analysis of receivables method At the end of the...Ch. 8 - Note receivable Prefix Supply Company received a...Ch. 8 - Prob. 8.1EXCh. 8 - Prob. 8.2EXCh. 8 - Entries for uncollectible accounts, using direct...Ch. 8 - Entries for uncollectible receivables, using...Ch. 8 - Entries to write off accounts receivable Creative...Ch. 8 - Providing for doubtful accounts At the end of the...Ch. 8 - Prob. 8.7EXCh. 8 - Aging of receivables schedule The accounts...Ch. 8 - Estimating allowance for doubtful accounts Evers...Ch. 8 - Adjustment for uncollectible accounts Using data...Ch. 8 - Estimating doubtful accounts Outlaw Bike Co. is a...Ch. 8 - Entry for uncollectible accounts Using the data in...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Effect of doubtful accounts on net income During...Ch. 8 - Effect of doubtful accounts on net income Using...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Determine due date and interest on notes Determine...Ch. 8 - Entries for notes receivable Valley Designs Issued...Ch. 8 - Entries for notes receivable The series of five...Ch. 8 - Entries for notes receivable, including year-end...Ch. 8 - Entries for receipt and dishonor of note...Ch. 8 - Entries for receipt and dishonor of notes...Ch. 8 - Receivables on the balance sheet List any errors...Ch. 8 - Allowance method entries The following...Ch. 8 - Aging of receivables; estimating allowance for...Ch. 8 - Compare two methods of accounting for...Ch. 8 - Details of notes receivable and related entries...Ch. 8 - Notes receivable entries The following data relate...Ch. 8 - Sales and notes receivable transactions The...Ch. 8 - Allowance method entries The following...Ch. 8 - Aging of receivables; estimating allowance for...Ch. 8 - Compare two methods of accounting for...Ch. 8 - Details of notes receivable and related entries...Ch. 8 - Prob. 8.5BPRCh. 8 - Sales and notes receivable transactions The...Ch. 8 - Continuing Company AnalysisAmazon: Accounts...Ch. 8 - Ralph Lauren: Accounts receivable turnover and...Ch. 8 - Prob. 8.3ADMCh. 8 - Prob. 8.4ADMCh. 8 - Ethics In Action Bud Lighting Co. is a retailer of...Ch. 8 - Communication On January 1, Xtreme Co. began...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Accounts Receivable Turnover and Number of Days Sales in Receivables Analyze and compare Amazon.com to Best Buy Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy, Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Sales and accounts receivable information for both companies for a recent period follows (in millions): Amazon Best Buy Sales 135,987 39,528 Accounts receivable: Beginning of year 5,654 1,280 End of year 8,339 1,162 a.Determine the accounts receivable turnover for each company. Round all calculations to one decimal place. b.Determine the number of days sales in receivables for each company. Round all calculations to one decimal place. c. Evaluate the relative efficiency in collecting accounts receivables between the two companies. d. What might explain this difference?arrow_forwardCodification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.arrow_forwardAnalyze and compare Amazon.com and Wal-Mart Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Wal-Mart Stores, Inc. (WMT) is the largest retailer in the United States. Amazon and Wal-Mart compete in similar markets; however, Wal-Mart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Interest expense and income before income tax expense from the financial statements of both companies for two recent years follow (in millions): a. Compute the times interest earned ratio for both companies for the two years. Round to one decimal place. b. Interpret Amazons interest coverage from Year 1 to Year 2. c. Does a times interest earned ratio less than 1.0 mean that creditors will not get paid interest? d. Interpret Wal-Marts interest coverage from Year 1 to Year 2. e. Which company appears to have the greater protection for creditors?arrow_forward
- FINANCIAL RATIOS Use the spreadsheet and financial statements prepared in Problem 15-8A. All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was 10,200. REQUIRED Prepare the following financial ratios: (a) Current ratio (b) Quick ratio (c) Working capital (d) Return on owners equity (e) Accounts receivable turnover and average number of days required to collect receivables (f) Inventory turnover and average number of days required to sell inventoryarrow_forwardFINANCIAL RATIOS Use the work sheet and financial statements prepared in Problem 15-8B. All sales are credit sales. The Accounts Receivable balance on January 1 was 38,200. REQUIRED Prepare the following financial ratios: (a) Working capital (b) Current ratio (c) Quick ratio (d) Return on owners equity (e) Accounts receivable turnover and the average number of days required to collect receivables (f) Inventory turnover and the average number of days required to sell inventoryarrow_forwardQuestion Content Area Accounts Receivable Analysis 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 your calculations and answers to one decimal place. Assume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in receivables fill in the blank 3 days fill in the blank 4 days b. Fill in the blank: Xavier's accounts receivable turnover is much 1)_____ than Lestrade's. The…arrow_forward
- Question 1 Prepare a Trade Receivables Control Account and a Trade Payables Control Account from the following totals extracted from the books of Kedai Mega for a financial year. RM January 1 Sales ledger debit balances 43,048 Purchase ledger credit balances 36,400 December 31 Sales Journal 563,120 Purchases Journal 383,600 Returns Inwards Journal 3,736 Returns Outwards Journal 2,528 Cheques received from customers 462,660 Cheques paid to suppliers 400,400 Discount allowed 2,860 Discount received 3,672 Bad debts 1,540 Dishonoured cheques 160 Discount allowed withdrawn 16arrow_forwardAccounts Receivable Analysis 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 $219,000 $306,600 Credit card receivables-beginning 40,352 63,501 Credit card receivables-ending 33,688 48,891 a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round answers to one decimal place. Assume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in receivables fill in the blank 3 days fill in the blank 4 days b. Xavier’s accounts receivable turnover is than Lestrade’s. The number of days' sales in receivables is for Xavier than for Lestrade. These…arrow_forwardA Financial Analysis Statement Calculate the 2021 (year ended 12/31/21) current ratio for Twitter. Calculate the 2021 (year ended 12/31/2021) current ratio for Meta. Which company has a better current ratio and why? Explain in a short paragraph. Calculate the 2021 accounts receivable turnover ratio for Twitter. Calculate the 2021 accounts receivable turnover ratio for Meta. Calculate the average collection period for each company. Show answer as number of days plus 2 decimals. Which company has a better receivable turnover ratio and why? Explain in a short paragraph. Calculate the 2021 return on assets for Twitter. Calculate the 2021 return on assets for Meta. Which company has a better return on assets and why? Explain in a short paragraph. Calculate the 2021 debt-to-equity ratio for Twitter. Calculate the 2021 debt-to-equity ratio for Facebook. Describe in a short paragraph what the debt-to-equity ratio measures and why this would be important to a potential creditor.…arrow_forward
- Comparative figures for Apple and Google follow. $ millions Apple Google Current Year One Year Prior Two Years Prior Current Year One Year Prior Two Years Prior Accounts receivable, net $ 22,926 $ 23,186 $ 17,874 $ 25,326 $ 20,838 $ 18,336 Net sales 260,174 265,595 229,234 161,857 136,819 110,855 Required:1. Compute the accounts receivable turnover for the two most recent years for (a) Apple and (b) Google.2. Which company more quickly collects its accounts receivable in the current year?arrow_forwardeBook Show Me How Question Content Area Accounts receivable turnover and days’ sales in receivables For two recent years, Robinhood Company reported the following: Line Item Description 20Y9 20Y8 Sales $7,906,000 $6,726,000 Accounts receivable: Beginning of year 600,000 540,000 End of year 580,000 600,000 a. Determine the accounts receivable turnover for 20Y9 and 20Y8. Round your answers to one decimal place. b. Determine the days’ sales in receivables for 20Y9 and 20Y8. Assume 365 days in a year. Round intermediate calculations and final answers to one decimal place.arrow_forwardAccounts receivable turnover and days' sales in receivables OBJ.8 The Campbell Soup Company manufactures and markets food products throughout the world. The following sales and receivable data (in millions) were reported by Campbell Soup for two recent years: Sales Accounts receivable Year 2 $8,685 805 Year 1 $7,890 616 Assume that the accounts receivable were $638 million at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round average ac- counts receivable to one decimal place and accounts receivable turnover to two decimal places. b. Compute the days' sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. What conclusions can be drawn from these analyses regarding Campbell's efficiency in collecting receivables?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Corporate Financial AccountingAccountingISBN:9781337398169Author:Carl Warren, Jeff JonesPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781337398169
Author:Carl Warren, Jeff Jones
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License