Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 9, Problem 9EB
Using the following select financial statement information from Mover Supply Depot, compute the number of days’ sales in receivables ratios for 2018 and 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Mover Supply Depot if the competition collects in approximately 65 days?
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Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following.
Compute the accounts receivable turnover ratios for each company for 2018 and 2019.
Compute the number of days’ sales in receivables ratios for each company for 2018 and 2019.
Determine which company is the better investment and why. Round answers to two decimal places.
Millennial Manufacturing has net credit sales for 2018 in the amount of $1,453,630, beginning accounts receivable balance of $590,900, and an ending accounts receivable balance of $626,450.
A. Compute the accounts receivable turnover ratio and the number of days' sales in receivables ratio for 2018. Round answers to two decimal places.
B. What do the outcomes tell a potential investor about Millennial Manufacturing if industry average is 2.6 times and number of day’s sales ratio is 180 days?
a.
Millennial Manufacturing collects its accounts more quickly than its competitors.
b.
A lender may favour Millennial Manufacturing over its competitors because of its faster collection period.
c.
Without prior years’ data it is hard to tell if Millennial Manufacturing is really more efficient than its competitors.
d.
All of the above statements may be correct.
The following is select financial statement information from Vortex Computing:
Year
Net Credit Sales
Ending Accounts Receivable
2018
$1,557,200
$398,000
2019
$1,755,310
$444,400
2020
$1,865,170
$500,780
Compute the accounts receivable turnover ratios and the number of days’ sales in receivables ratios for 2019 and 2020 (round answers to two decimal places):
2019 Accounts Receivable Turnover = ["", "", "", ""] times.
2019 Days' Sales in Receivables = ["", "", "", ""] days.
2020 Accounts Receivable Turnover = ["", "", "", ""] times.
2020 Days' Sales in Receivables = ["", "", "", ""] days.
What do the outcomes tell a potential investor about Vortex Computing, if 2020 industry average for accounts receivable turnover ratio is 4.00 times and days’ sales in receivables ratio is 91.25 days?
It takes Vortex Computing ["", "", ""] its competitors in the industry to collect on accounts receivable. If a lender were deciding between companies,…
Chapter 9 Solutions
Principles of Accounting Volume 1
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