Accounts receivable turnover and days sales in receivables...

Accounts receivable turnover and days' sales in receivables For two recent years, Robinhood Company reported the following: 20Y9 20Y8 Sales $7,980,000 $6,726,000 Accounts receivable: Beginning of year $610,000 $530,000 End of year $590,000 $610,000 a. Determine the accounts receivable turnover for 20Y9 and 20Y8. Round answers to one decimal place. 20Y8: 20Y9: b. Determine the days' sales in receivables for 20Y9 and 20Y8. Use 365 days and round all calculations to one decimal place. 20Y8: days 20Y9: days c. Are the changes in the accounts receivable turnover and days' sales in receivables from 20Y8 to 20Y9 favorable or unfavorable?

Transcript

00:01 So in the given question we need to find out the account receivable turnover for 20 y9 and 20 y8.

00:08 So first of all what we will be doing we will be assuming the total sales that is given to us are all the credit sales.

00:15 So we have assumed all sales are on credit.

00:28 Now we know that account receivable turnover ratio is equal to turnover ratio is.

00:42 Equal to the net credit sales and when this net credit sales is divided by average accounts receivable we are going to get account receivable turnover ratio so average accounts receivable and this average account receivable can be computed with the formula that is beginning account receivable plus the closing account receivable or the ending account receivables so we have to first add these two balances and after adding this when this balance is divided by two we are going to get average account receivable now let's see what are the data given to us so we have taken the two years that is 20 y9 and 20 y8 so we have been given with the sales value and we have credited these all sales to be on credit so for the year two zero y nine the sales is of seven million nine hundred and eighty thousand dollars and for the year two zero why it is given six million seven hundred and twenty six thousand dollars and the account receivable balance on the beginning balance is given to be for the 20y9 it is $610 ,000 and for the year 2000 y8 the opening balance is of $530 ,000 similarly we have been also given with the account receivable and its ending balance so the ending balance given to us is 590 ,000 for 20y9 and 610 ,000 for 20 y8 now what we can do we can easily find out the average account receivable now for the year 20 y9 this is going to be beginning account receivable that is six hundred ten thousand dollars plus the ending account receivable that is five ninety thousand dollars upon two that gives us six hundred thousand dollars so we have account receivable that is average account receivable for 20y9 600 000 now similarly for 20 y8 the average account receivable is going to be the beginning account receivable of 530 ,000 plus the ending account receivable of 610 ,000 upon 2 that gives us 570 ,000 as a average account receivable so now we have find out the average account receivable so now the account receivable turnover ratio which is net credit sales upon average account receivable so for the year 20 by 9 account receivable that is turnover ratio is going to be net credit sales and net credit sales we have been given with 7 million nine 180 ,000 dollars and the average account receivable we have computed to be 600 ,000.

05:09 So that comes to 13 .3 times.

05:14 So this is the average account receivable turnover for 20y9.

05:19 Similarly for 20y8, the net credit sales is $6 ,726 ,000.

05:27 And the average account receivable we have computed to be 500.

05:32 70 ,000 dollars so that finally gives us 11 .8 times...

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