Accounts Receivable Analysis The following data are taken from the financial sta
ID: 2755740 • Letter: A
Question
Accounts Receivable Analysis
The following data are taken from the financial statements of McKee Technology Inc. Terms of all sales are 2/10, n/55.
a. For 2013 and 2014, 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.
b. The collection of accounts receivable has SelectimproveddeterioratedItem 5 . This can be seen in both the SelectincreasedecreaseItem 6 in accounts receivable turnover and the SelectincreasedecreaseItem 7 in the collection period.
2014 2013 2012 Accounts receivable, end of year $175,000 $190,000 $204,200 Net sales on account 1,241,000 1,222,020Explanation / Answer
Accounts Receivable Turnover= Average Credit Sales/(Accounts receivable at the beginning of the year+Accounts receivable at the end of the year)/2
2013= $12,22,020/($1,90,000+$2,04,200)/2
=12,22,020/197100
6.2
Number of Days Sales in Receivable= 365/6.2
=58.9 Days
2014= 1241000/(1,90,000+1,75,00)/2
=12,41,000/182500
=6.8
Number of Days in Sales receivable= 365/6.8
=53.7
b The collection of Accounts receivable has improved as the Accounts receivable turnover has increased and the Number of Days Sales in receivable is decreased.