Asked by Stanley Little on Jul 21, 2024
Verified
For the fiscal years 1 and 2, Grange Co. reported the following: 
(a) Compute the accounts receivable turnover for Year 2. Round to two decimals.(b) Compute the number of days' sales in receivables at the end of Year 2. Round to two decimals.
Accounts Receivable Turnover
A financial ratio that measures how effectively a company collects cash from credit sales by comparing net credit sales with the average balance of accounts receivable.
Fiscal Years
A one-year period that companies and governments use for financial reporting and budgeting, differing from the calendar year.
- Master the process and mathematical determination of accounts receivable turnover, including the analysis of days' sales in receivables.
Verified Answer
AK
Ahmad KarimehJul 24, 2024
Final Answer :
(a)Accounts receivable turnover = Net sales/Average accounts receivable
Accounts receivable turnover = $34,124,961/[($749,321 + $719,365)/2]
Accounts receivable turnover = 46.47
(b)Number of days' sales in receivables = Avg. accounts receivable/Avg. daily sales
Number of days' sales in receivables = [($749,321 + $719,365)/2]/ ($34,124,961/365 days)Number of days' sales in receivables = 7.85
Accounts receivable turnover = $34,124,961/[($749,321 + $719,365)/2]
Accounts receivable turnover = 46.47
(b)Number of days' sales in receivables = Avg. accounts receivable/Avg. daily sales
Number of days' sales in receivables = [($749,321 + $719,365)/2]/ ($34,124,961/365 days)Number of days' sales in receivables = 7.85
Learning Objectives
- Master the process and mathematical determination of accounts receivable turnover, including the analysis of days' sales in receivables.