1. Explanation Accounts receivable turnover: Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In simple, it indicates the number of times the average amount of net accounts receivables has been collected during a particular period. Average collection period: Average collection period indicates the number of days taken by a business to collect its outstanding amount of accounts receivable on an average. Calculate accounts receivables turnover ratio and days to collect for Company M for 2012 as follows: Accounts receivable turnover for Company M for 2012 } = Net sales Average net accounts receivable = Net sales ( Beginning net accounts receivable + Ending net accounts receivable ) 2 = $ 6 , 400 ( $ 1 , 230 + $1,250 ) 2 = 5 .2 times Days to collect Company M for 2012 } = 365 days Accounts receivable turnover = 365 5 .2 times = 70.2 days Thus, the accounts receivables turnover ratio and the number of days to collect the receivables for Company M for the year 2012 are 5.2 times and 70.2 days respectively. Calculate accounts receivables turnover ratio and days to collect for Company M for 2011 as follows: Accounts receivable turnover for Company M for 2011 } = Net sales Average net accounts receivable = Net sales ( Beginning net accounts receivable + Ending net accounts receivable ) 2 = $ 6 , 300 ( $ 1 , 250 + $1,180 ) 2 = 5 .2 times Days to collect Company M for 2011 } = 365 days Accounts receivable turnover = 365 5 .2 times = 70 2. To determine To identify: The company which was quicker ability to convert its receivables into cash in 2012 and 2011.

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Chapter 8, Problem 8.5CP

To determine

The receivables turnover ratio and days to collect for Company M and Company H for 2012 and 2011.

To determine

To identify: The company which was quicker ability to convert its receivables into cash in 2012 and 2011.

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Chapter 8, Problem 8.4CP

Chapter 8, Problem 8.1PA

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Chapter 8 Solutions

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Ch. 8 - What are the advantages and disadvantages of...Ch. 8 - Prob. 2Q Ch. 8 - Which basic accounting principles does the...Ch. 8 - Using the allowance method, is Bad Debt Expense...Ch. 8 - What is the effect of the write-off of...Ch. 8 - How does the use of calculated estimates differ...Ch. 8 - Prob. 7Q Ch. 8 - What is the primary difference between accounts...Ch. 8 - What are the three components of the interest...Ch. 8 - Prob. 10Q

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The receivables turnover ratio and days to collect for Company M and Company H for 2012 and 2011.

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The receivables turnover ratio and days to collect for Company M and Company H for 2012 and 2011.

To identify: The company which was quicker ability to convert its receivables into cash in 2012 and 2011.

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