Based on the following data and using a 365-day year, compute(a) the accounts receivable turnover and(b) days' sales in receivables for Year 2. Round to two decimal places. The industry average turnover is 20 times during the year, and the days' sales in receivables averages 25.(c) Comment on this situation. 12 / 31 / Year 1 accounts receivable 100 , 000 12 / 31 / Year 2 accounts receivable 70 , 000 For the year ended 12 / 31 / Year 1 , sales 1 , 050 , 000 For the year ended 12 / 31 / Year 2 , sales 1 , 200 , 000 \begin{array}{lr}12 / 31 / ext { Year } 1 ext { accounts receivable } & 100,000 \12 / 31 / ext { Year } 2 ext { accounts receivable } & 70,000 \ ext { For the year ended } 12 / 31 / ext { Year } 1 ext {, sales } & 1,050,000 \ ext { For the year ended } 12 / 31 / ext { Year } 2 ext {, sales } & 1,200,000\end{array} 12/31/ Year 1 accounts receivable 12/31/ Year 2 accounts receivable For the year ended 12/31/ Year 1 , sales For the year ended 12/31/ Year 2 , sales 100 , 000 70 , 000 1 , 050 , 000 1 , 200 , 000

Question

Based on the following data and using a 365-day year, compute(a) the accounts receivable turnover and(b) days' sales in receivables for Year 2. Round to two decimal places. The industry average turnover is 20 times during the year, and the days' sales in receivables averages 25.(c) Comment on this situation.   12 / 31 /  Year  1  accounts receivable  100 , 000 12 / 31 /  Year  2  accounts receivable  70 , 000  For the year ended  12 / 31 /  Year  1 , sales  1 , 050 , 000  For the year ended  12 / 31 /  Year  2 , sales  1 , 200 , 000 \begin{array}{lr}12 / 31 / 	ext { Year } 1 	ext { accounts receivable }  &  100,000 \12 / 31 / 	ext { Year } 2 	ext { accounts receivable }  &  70,000 \	ext { For the year ended } 12 / 31 / 	ext { Year } 1 	ext {, sales }  &  1,050,000 \	ext { For the year ended } 12 / 31 / 	ext { Year } 2 	ext {, sales }  &  1,200,000\end{array} 12/31/  Year  1  accounts receivable  12/31/  Year  2  accounts receivable   For the year ended  12/31/  Year  1 , sales   For the year ended  12/31/  Year  2 , sales  ​ 100 , 000 70 , 000 1 , 050 , 000 1 , 200 , 000 ​

Sohaib Masud · Accepted Answer

Final Answer :

(a)$1,200,000 ÷ [ ($100,000 + $70,000) ÷ 2] = 14.12
(b)[ ($70,000 + $100,000) ÷ 2] ÷ ($1,200,000 ÷ 365 days) = 25.85 days
(c)This situation is slightly better than the industry average.

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