Instructions a) Calculate the accounts receivable turnover and average collection period for both companies. My answer for (a)     Surf Tide Net Accounts Receivable, beginning (Accounts receivable balance (gross), beginning-Allowance for doubtful accounts, beginning) (2,873.7-78.4) =2,795.3 (1,743-119) =1,624 Net Accounts Receivable, ending (Accounts receivable balance (gross), ending-Allowance for doubtful accounts, ending) (2994.7-110.8) =2,883.9 (1,553-124) =1,429 Average Net Accounts Receivable (Net Accounts Receivable, beginning+Net Accounts Receivable, ending) / 2 (2,795.3+2,883.9)/2 =2,839.6 (1,624+1,429)/2 =1,526.5 Accounts Receivable Turnover (Sales/Average Net Accounts Receivable) (19,176.1/2,839.6) =6.75 times (10,381/1,526.5) =6.8 times Average Collection Period (365/Accounts Receivable Turnover) (365/6.75) =54.07 days (365/6.8) =53.68 days b) Comment on the difference in their collection experiences.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose the amounts presented here are basic financial information (in millions) from the 2020 annual reports of Surf and Tide.

  Surf Tide
Sales revenue $19,176.1 $10,381
Allowance for doubtful accounts, beginning 78.4 119
Allowance for doubtful accounts, ending 110.8 124
Accounts receivable balance (gross), beginning 2,873.7 1,743
Accounts receivable balance (gross), ending 2,994.7 1,553

Instructions

a) Calculate the accounts receivable turnover and average collection period for both companies.

My answer for (a)

 

  Surf Tide

Net Accounts Receivable, beginning

(Accounts receivable balance (gross), beginning-Allowance for doubtful accounts, beginning)

(2,873.7-78.4)

=2,795.3

(1,743-119)

=1,624

Net Accounts Receivable, ending

(Accounts receivable balance (gross), ending-Allowance for doubtful accounts, ending)

(2994.7-110.8)

=2,883.9

(1,553-124)

=1,429

Average Net Accounts Receivable

(Net Accounts Receivable, beginning+Net Accounts Receivable, ending) / 2

(2,795.3+2,883.9)/2

=2,839.6

(1,624+1,429)/2

=1,526.5

Accounts Receivable Turnover

(Sales/Average Net Accounts Receivable)

(19,176.1/2,839.6)

=6.75 times

(10,381/1,526.5)

=6.8 times

Average Collection Period

(365/Accounts Receivable Turnover)

(365/6.75)

=54.07 days

(365/6.8)

=53.68 days

b) Comment on the difference in their collection experiences.

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