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Financial statement data for years ending December 31 for Robinhood Company follows: a. Determine the accounts receivable turnover for 2016 and 2015. b. Determine the number of days’ sales in receivables for 2016 and 2015. Use 365 days and round to one decimal place. c. Does the change in accounts receivable turnover and the number of days’ sales in receivables from 2015 to 2016 indicate a favorable or an unfavorable trend?

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Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436

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BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436
Chapter 9, Problem 6PEB
Textbook Problem
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Financial statement data for years ending December 31 for Robinhood Company follows:

Chapter 9, Problem 6PEB, Financial statement data for years ending December 31 for Robinhood Company follows: a. Determine

  1. a. Determine the accounts receivable turnover for 2016 and 2015.
  2. b. Determine the number of days’ sales in receivables for 2016 and 2015. Use 365 days and round to one decimal place.
  3. c. Does the change in accounts receivable turnover and the number of days’ sales in receivables from 2015 to 2016 indicate a favorable or an unfavorable trend?

(a)

To determine

Calculate Company R’s accounts receivable turnover ratio for 2016 and 2015.

Explanation of Solution

Accounts receivable turnover: Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the sales by the average amount of net accounts receivables. In other words, average receivable turnover ratio identifies the number of times the average amount of accounts receivables being collected during a particular period.

Calculate Company R’s accounts receivable turnover ratio for 2016.

Accounts receivableturnover}=SalesAverage accounts receivable=Sales(Accounts receivable at the beginning of the year+Accounts receivableat the end of the year2)=$7,906,000($600,000+$580,0002)=13

(b)

To determine

Calculate Company R’s days’ sales in receivables for 2016 and 2015.

(c)

To determine

Identify whether the change in accounts receivable turnover and the day’s sales in receivables from 2015 to 2016 are favorable or unfavorable.

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Chapter 9 Solutions

Financial Accounting
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