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 Web sites. For two recent years, Best Buy reported the following (in millions): Year 2 Year 1 Sales $50,705 $49,747 Accounts receivable at end of year 2,288 2,348 Assume that the accounts receivable (in millions) were $2,020 at the beginning of fiscal Year 1. 1. Compute the accounts receivable turnover for Year 2 and Year 1, Round to one decimal place. 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 therefore cause the ratios not to be comparable for year 2 and Year 1?

BuyFind

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
BuyFind

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

Solutions

Chapter 8, Problem 8.3CP
Textbook Problem

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 Web sites. For two recent years, Best Buy reported the following (in millions):

  Year 2 Year 1
Sales $50,705 $49,747
Accounts receivable at end of year 2,288 2,348

Assume that the accounts receivable (in millions) were $2,020 at the beginning of fiscal Year 1.

  1. 1. Compute the accounts receivable turnover for Year 2 and Year 1, Round to one decimal place.
  2. 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. 3. What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?
  4. 4. What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for year 2 and Year 1?

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Chapter 8 Solutions

Financial & Managerial Accounting
Ch. 8 - Direct write-off method Journalize the following...Ch. 8 - Direct write-off method Journalize the following...Ch. 8 - Allowance 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 - Percent of sales method At the end of the current...Ch. 8 - Analysis of receivables method At the end of the...Ch. 8 - Analysis of receivables method At the end of the...Ch. 8 - Note receivable Guzman Company received a 60-day,...Ch. 8 - Note receivable Prefix Supply Company received a...Ch. 8 - Accounts receivable turnover and number of days'...Ch. 8 - Accounts receivable turnover and number of days...Ch. 8 - Classifications of receivables Boeing is one of...Ch. 8 - Nature of uncollectible accounts MGM Resorts...Ch. 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 - Number of days past due Toot Auto Supply...Ch. 8 - Aging of receivables schedule The accounts...Ch. 8 - Estimating allowance for doubtful accounts Waddell...Ch. 8 - Adjustment for uncollectible accounts Using data...Ch. 8 - Estimating doubtful accounts Selby's 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 Master Designs...Ch. 8 - Entries for notes receivable The series of seven...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 - Accounts receivable turnover and days' sales in...Ch. 8 - Accounts receivable turnover and days sales in...Ch. 8 - Accounts receivable turnover and days' sales in...Ch. 8 - Accounts receivable turnover Use the data in...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 - Notes receivable entries The following data relate...Ch. 8 - Sales and notes receivable transactions The...Ch. 8 - Ethics and professional conduct in, business Bev...Ch. 8 - Estimate uncollectible accounts For several years,...Ch. 8 - Accounts receivable turnover and days sales in...Ch. 8 - Accounts receivable turnover and days' sales in...Ch. 8 - Accounts receivable turnover and days' sales in...

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