Question

Accounts Receivable Analysis

The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45.

	20Y3		20Y2		20Y1
Accounts receivable, end of year	$135,400		$142,000		$150,000
Sales on account	901,550		861,400

a. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Round answers to one decimal place. Assume a 365-day year.

	20Y3		20Y2
1. Accounts receivable turnover
2. Number of days' sales in receivables		days		days

b. The collection of accounts receivable has  . This can be seen in both the   in accounts receivable turnover and the   in the collection period.

Answer 1

a
	20Y3	20Y2
1. Accounts receivable turnover	6.5	5.9
2. Number of days' sales in receivables	56.2	61.9
b
The collection of accounts receivable has improved . This can be seen in both the increase in accounts receivable turnover and the decrease in the collection period.
Workings:
	20Y3	20Y2
Sales on account	901550	861400
Divide by Average Accounts receivable	138700	146000
Accounts receivable turnover	6.5	5.9
	20Y3	20Y2
Days in a year	365	365
Divide by Accounts receivable turnover	6.5	5.9
Number of days' sales in receivables	56.2	61.9