Answer:
3D Family Fireworks
a-1. The receivables turnover ratio for the month of January is:
= 5.3 times.
a-2. With the industry average of the receivables turnover ratios for the month of January of 4.4 times, 3D Family Fireworks is collecting cash from customers more efficiently than other companies in the same industry.
Explanation:
a) Data and Calculations:
Accounts Debit Credit
Cash $ 24,900
Accounts Receivable 14,100
Allowance for Uncollectible Accounts $ 1,800
Supplies 3,000
Notes Receivable (6%, due in 2 years) 25,000
Land 77,500
Accounts Payable 8,800
Common Stock 101,000
Retained Earnings 32,900
Totals $ 144,500 $ 144,500
January 2021 Transactions Analysis:
January 2 Cash, $40,100 Service Revenue $40,100
January 6 Accounts receivable $77,400 Service Revenue $77,400
January 15 Allowance for Uncollectible Accounts $1,400 Accounts receivable $1,400
January 20 Salaries Expense $31,900 Cash $31,900
January 22 Cash $75,000 Accounts receivable, $75,000
January 25 Accounts payable, $6,000 Cash $6,000
January 30 Utilities Expenses $14,200 Cash $14,200
Accounts Receivable
Accounts Debit Credit
Beginning balance $ 14,100
Service Revenue 77,400
Allowance for Uncollectible Accounts $1,400
Cash 75,000
Ending balance 15,100
Credit Service Revenue = 77,400
Average accounts receivable = $14,600 ($14,100 + $15,100)/2
Receivables Turnover ratio = $77,400$14,600 = 5.3 times
Industry average of receivables turnover ratio = 4.4 times
