BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Accounts receivable turnover and days’ sales in receivables

Apple Inc. designs, manufactures, and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. Substantially all of the company’s sales over the last five years are from sales of its Macs, iPods, iPods, and related software and peripherals. For two recent fiscal years, Apple reported the following (in millions):

  Year2 Year1
Sales $233,715 $182,795
Accounts receivable at end of year 35,889 31,537

Assume that the accounts receivable (in millions) were $24,094 at the beginning of fiscal Year 1.

  1. 1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
  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 Apple’s efficiency in collecting receivables?

(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.

To calculate: The accounts receivable turnover for Year 2 and Year 1.

Explanation

Calculate accounts receivable turnover ratio for Year 2.

Accountsreceivableturnover for Year 2}=Net salesAverageaccountreceivable=Net sales(Accountsreceivable, ending +Accountsreceivable, beginning2)=$233,715($35,889+$31,5372)=6.93times

Calculate accounts receivable turnover ratio for Year 1

(2)

To determine

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 day’s sales in receivables at the end of Year 2 and Year 1.

(3)

To determine

To conclude: The Efficiency of Incorporation A’s management in collecting accounts receivables.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

How is the grapevine used in a business organization?

Foundations of Business (MindTap Course List)

Define the term product

MKTG 12:STUDENT ED.-TEXT

What has happened to Hewlett Packard's liquidity position over the past 5 years? How does Hewlett Packard's liq...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Explain the relationship among saving, investment, and net capital outflow.

Principles of Macroeconomics (MindTap Course List)