ACCTG 101 Lecture Notes - Lecture 24: Inventory Turnover, Accounts Receivable

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ochrehornet578

14 Sep 2020

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Accounts receivable analysis: number of days" sales in receivables. Another metric that relates sales and accounts receivable is the number of days" sales in receivables. This ratio is computed by dividing the average accounts receivable by the average daily sales which is determined by dividing net sales by. The number of days" sales in receivables is an estimate of the length of time (in days) that the accounts receivables have been outstanding. Comparing this measure with the credit terms provides information on the efficiency in collecting receivables. A comparison with other firms in the industry and with prior years also provides useful information. Such comparisons may indicate efficiency of collection procedures and trends in credit management. The number of days" sales in receivables is computed for grand company as follows: Average daily sales (net sales 365) (average accounts receivable average daily sales) Grand company improved its collections of accounts receivable by 10. 9 days in.

Related Questions

Open the following selected accounts recording the opening balances as of January 1 of the current year.

114.1	Allowance for doubtful accounts	12,200 Credit
313	Income summary
718	Bad debts expense

3.Record the following transactions in general journal form in the Group Project Excel Spreadsheet Problem 2 Parts 2 - 6 tab.

4.Post these transactions to the three selected accounts above and to Accounts receivable.

5.Enter the ending balances in the three accounts above and enter the ending balance in the Accounts Receivable account.

Apr 1, 09	Accepted a $20,000, one - year, 8% note dated April 1 from Bruce Hanson for the sale of inventory; Cost of Goods Sold was $16,500.
June 27	Wrote off the $2,375 balance owed by Miller Corp., which has no assets.
Oct. 5	Received 25% of the $12,000 balance owed by F.M. Knox Co., a bankrupt, and wrote off the remainder as uncollectible.
Dec. 31	Based on an analysis of the $257,724 of accounts receivable, it was estimated that $14,500 will be uncollectible. Record the adjusting entry using the Aging method.
Dec. 31	Record the adjusting entry for interest accrued on the Bruce Hanson note
Dec. 31	Record the entries to close the appropriate accounts into Retained Earnings.
April 1, 10	Collected the maturity value on the Hanson note.

6.Determine the net accounts receivable (the amount Summer expects to collect as of December 31.

7.Compute the accounts receivable turnover and the dayâs sales in receivables for the year. Assume that there were $1,800,000 sales account.

8.How is Summer Company doing with collection of their accounts receivable compared to the industry? Assume the industry average for the accounts receivable turnover is 11 and the industry average for the dayâs sales in receivables is 37 days?

scarletraven382

____ 16. A 180-day, 12 percent interest-bearing note receivable is sold to a bank after being held for 45 days. The proceeds are calculated using a 15 percent interest rate. The note receivable has been

Discounted

Pledged

a.	Yes Yes
b.	Yes No
c.	No Yes
d.	No No

____ 17. Based on its past collection experience, Ace Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2016, the allowance for doubtful accounts credit balance was $10,000. During 2016, Ace wrote off $8,000 of uncollectible receivables and recovered $5,000 on accounts written off in prior years. If net credit sales for 2016 are $1,000,000, the doubtful accounts expense for 2015 should be

a.	$7,000.
b.	$20,000.
c.	$23,000.
d.	$35,000.

____ 18. Millward Corporation's books disclosed the following information for the year ended December 31, 2015:

Net credit sales .....................................	$1,500,000
Net cash sales .......................................	240,000
Accounts Receivable at beginning of year .............	200,000
Accounts Receivable at end of year ...................	400,000

Millward's accounts receivable turnover is

a.	3.75 times.
b.	4.35 times.
c.	5.00 times.
d.	5.80 times.

____ 19. Assume the following facts for Kurt Company: The month-end bank statement shows a balance of $40,000; outstanding checks total $2,000; a deposit of $8,000 is in transit at month-end; and a check for $400 was erroneously charged against the account by the bank. What is the correct cash balance at the end of the month?

a.	$33,600
b.	$34,400
c.	$45,600
d.	$46,400

____ 20. On June 1, Clinton Corporation accepted a customer's $10,000, 9 percent, 3 month note. On July 1, the note was discounted at a bank at a rate of 12 percent.

a. What is the maturity value of the note (10,000*.09*3/12)? _______

b. How much cash did Clinton receive from the bank on the discounted note (MV * .12*2/12)? $10,225- ?

a.	$9,800.00
b.	$9,942.50
c.	$10,020.50
d.	$10,250.00

graywombat44

Ludwig Inc.'s adjusted trial balance is shown below. In addition, the following information is known:

No shares were issued in the years ended December 31, 2016 and 2017.

No dividends were declared or paid in the years ended December 31, 2016 and 2017.

The market value for the common shares at December 31, 2016 and 2017 were $15 and $16 respectively.

Ludwig Inc.

Adjusted Trial Balance

December 31,

2017 2016 2015

Cash 595,050 412,850 146,500

Account receivable 40,600 32,950 31,675

Allowance for doubtful accounts 10,000 3,750 5,575

Merchandise inventory 42,500 41,900 39,900

Prepaid expenses 3,000 2,600 2,900

Notes receivable, due in 2019 13,000 15,500 13,500

Property, plant and equipment assets 371,250 405,725 516,650

Accumulated depreciation 91,250 90,725 126,650

Accounts payable 36,700 36,700 35,300

Unearned sales 5,200 4,500 4,500

Notes payable, due in 2020 60,000 68,000 70,000

Preferred shares; $1.00 non-cumulative; 100,000 shares 290,000 290,000 290,000

Common shares; 50,000 shares issued and outstanding 170,000 170,000 170,000

Retained earnings 247,850 49,100 7,400

Sales 1,226,400 1,038,600 1,286,500

Cost of goods sold 849,400 604,100 1,099,600

Other operating expenses 167,700 201,800 124,800

Interest expense 8,900 8,750 7,600

Income tax expense 46,000 25,200 12,800

Ratio 2017 2016 Change Ind. Average Comparison

Current ratio 13.26

Acid-test ratio 16.15

Accounts receivable turnover 36.75

Merchandise turnover 21.34

Days' sales uncollected 7.78

Days' sales in inventory 19.41

Total asset turnover 1.44

Debt ratio 12.68

Equity ratio 87.32

Times interest earned 21.29

Profit margin 13.26

Gross margin 26.93

Return on total assets 14.44

Return on common shareholders' equity 26.07

Book value per common share 12.91

Book value per preferred share 2.42

Basic earnings per share 3.25

Price-earnings ratio 5.93

Accounts Payable Turnover 18.60

Required:

Industry averages for each ratio are shown in the table above. Use this information to complete the chart above by calculating the required ratios, determining if the change from the previous year is favourable or unfavourable, and then determining whether the each ratio (for 2017) is favourable or unfavourable compared to the industry average. If there is no change to 2 decimal places, select 'No change' if comparing from year to year, or 'The same as' if comparing to the industry average. All values should be accurate to at least two decimal places.

ACCTG 101 Lecture Notes - Lecture 24: Inventory Turnover, Accounts Receivable

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