Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
26th Edition
ISBN: 9781337498159
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 9, Problem 9.3CP
(1)
To determine
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.
To calculate: The accounts receivable turnover for Year 2 and Year 1.
(2)
To determine
To calculate: The day’s sales in receivables at the end of Year 2 and Year 1.
(3)
To determine
To conclude: The Efficiency of Company B’s management in collecting accounts receivables.
(4)
To determine
The assumption about sales that might distort the ratios and makes the ratios not to be comparable for Year 2 and Year 1.
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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 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 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 9 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
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