Accounts Receivable Analysis The following data are taken from the financial sta

Question

Accounts Receivable Analysis The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45 20Y3 20Y2 20Y1 Accounts receivable, end of year Sales on account a. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Round answers to one decimal place. Assume a 365- day year $204,400 $219,000 $233,600 1,460,730 1,448,320 20Y3 20Y2 1. Accounts receivable turnover 2. Number of days' sales in receivables days days b. The collection of accounts receivable has improved .This can be seen in both the increasein accounts receivable turnover and the decrease in the collection period. Feedback

Explanation / Answer

Accounts receivable turnover = Net credit Sales / Average Account receivable

Number of days sales in receivables = 365 days / Accounts receivable turnover

Average Account receivable = ($204,400 + $219,000) / 2 = $211,700

Accounts receivable turnover = $1,460,730 / $211,700 = 6.9 times

Number of days sales in receivables = 365 days /  6.9 times = 52.9 days

Average Account receivable = ( $219,000 + $233,600) / 2 = $226,300

Accounts receivable turnover = $1,448,320 / $226,300 = 6.4 times

Number of days sales in receivables = 365 days /  6.4 times = 57 days

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