Costco Wholesale Corporation operates membership warehouses that sell a variety Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). For two recent years, Costco reported the following (in millions): _______________________ Year 2 Year 1 Sales ………………………………. $116,199 ………. $112,640 Accounts receivable at end of year … 1,972 …………….. 1,817 Assume that the accounts receivable (in thousands) were $1,822 at the beginning of 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 Costco’s efficiency in collecting receivables? 4. Given the nature of Costco’s operations, do you believe Costco’s accounts receivable turnover ratio would be higher or lower than a typical manufacturing company such as the Campbell Soup Company? Explain. Costco Wholesale Corporation operates membership warehouses that sell a variety

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Description: Costco Wholesale Corporation operates membership warehouses that sell a variety Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter9: Receivables

Section: Chapter Questions

Problem 5CP

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Costco Wholesale Corporation operates membership warehouses that sell a variety

Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). For two recent years, Costco reported the following (in millions):

_______________________________ Year 2 ________ Year 1

Sales ………………………………. $116,199 ………. $112,640

Accounts receivable at end of year … 1,972 …………….. 1,817

Assume that the accounts receivable (in thousands) were $1,822 at the beginning of 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 Costco’s efficiency in collecting receivables?

4. Given the nature of Costco’s operations, do you believe Costco’s accounts receivable turnover ratio would be higher or lower than a typical manufacturing company such as the Campbell Soup Company? Explain.

Costco Wholesale Corporation operates membership warehouses that sell a variety

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