Question

Accounts receivable turnover and days’ sales in receivables For two recent years, Robinhood Company reported the following: 20Y9 20Y8 Sales $7,906,000 $6,726,000 Accounts receivable: Beginning of year 600,000 540,000 End of year 580,000 600,000 a. Determine the accounts receivable turnover for 20Y9 and 20Y8. Round answers to one decimal place. 20Y8: 20Y9: b. Determine the days’ sales in receivables for 20Y9 and 20Y8. Use 365 days and round all calculations to one decimal place. 20Y8: days 20Y9: days c. Are the changes in the accounts receivable turnover and days’ sales in receivables from 20Y8 to 20Y9 favorable or unfavorable?

Answer 1

Answer:

The workings are done below;

Explanation:

                                                                   20Y8                               20Y9

a.Accounts Receivable Turnover         *11.8                                      **13.4

(Net Sales/Average Receivables)

*(6,726,000/((600,000+540,000)/2)  

**(7,906,000/((580,000+600,000)/2)    

b. Days' sales in receivables                  ***30.9                             ****27

(Average Receivables/Net Sales)*365  

***(((600,000+540,000)/2)/6,726,000)*365  

****(((580,000+600,000)/2)/7,906,000)*365      

c. The 20Y9 accounts receivable turnover ratio and days' sales in receivables are better as compared to 20Y8 because it takes 27days in 20Y9 as compared to 30 days in 20Y8.Both ratios of 20Y9 are lower than 20Y8