2014 2013
Net 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 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……………
Accts. receivable turnover……………
$7,906,000 $6,726,000
$ 600,000 $ 540,000
$ 580,000 $ 600,000
$ 590,000 $ 570,000
[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]
13.4 11.8
($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)
b. Number of Days’ Sales
in Receivables 2014 2013
Net sales…………………………………
Average daily sales……………………
Average accts. receivable……………
Number of days’ sales in
receivables……………………………
$7,906,000 $6,726,000
$ 21,660.3 $ 18,427.4
($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days)
$ 590,000 $ 570,000
[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]
27.2 days 30.9 days
($590,000 ÷ $21,660.3) ($570,000 ÷ $18,427.4)
c. The increase in the accounts receivable turnover from 11.8 to 13.4 and the
decrease in the number of days’ sales in receivables from 30.9 days to 27.2
days indicate favorable trends in the efficiency of collecting receivables.