2014 2013
Net sales $2,912,000 $2,958,000
Accounts receivable:
Beginning of year 300,000 280,000
End of year 340,000 300,000
a. Determine the accounts receivable turnover for 2014 and 2013.
b. Determine the number of days’ sales in receivables for 2014 and 2013. Round to one decimal place.
c. Does the change in accounts receivable turnover and the number of days’ sales in receivables from 2013 to 2014 indicate a favorable or an unfavorable trend?
Answer:
a. Accounts Receivable Turnover 2014 2013
Net sales……………………………
Accounts receivable:
Beginning of year………………
End of year………………………
Average accts. receivable…………
$2,912,000 $2,958,000
$ 300,000 $ 280,000
$ 340,000 $ 300,000
$ 320,000 $ 290,000
Accts. receivable turnover………
[($300,000 + $340,000) ÷ 2]
9.1
[($280,000 + $300,000) ÷ 2]
10.2
($2,912,000 ÷ $320,000) ($2,958,000 ÷ $290,000)
b. Number of Days’ Sales
in Receivables 2014 2013
Net sales………………………………
Average daily sales…………………
Average accts. receivable…………
Number of days’ sales in
receivables…………………………
$2,912,000 $2,958,000
$ 7,978.1 $ 8,104.1
($2,912,000 ÷ 365 days) ($2,958,000 ÷ 365 days)
$ 320,000 $ 290,000
[($300,000 + $340,000) ÷ 2] [($280,000 + $300,000) ÷ 2]
40.1 days 35.8 days
($320,000 ÷ $7,978.1) ($290,000 ÷ $8,104.1)
c. The decrease in the accounts receivable turnover from 10.2 to 9.1 and the
increase in the number of days’ sales in receivables from 35.8 days to 40.1
days indicate unfavorable trends in the efficiency of collecting receivables.