The following data are taken from the financial statements of Amazing Technology

Question

The following data are taken from the financial statements of Amazing Technology Inc. Terms of all sales are 2/10, n/30.

a. For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place.

a. For Years 2 and 3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place.

Year 3 Year 2 1. Accounts receivable turnover ______ ______ 2. Number of days' sales in receivables ______ days ______ days

Explanation / Answer

Net Annual Credit Sales
(Beginning Accounts Receivable + Ending Accounts Receivable) / 2

1. Accounts receivable turnover

year 3=4,224,000/320,000=13.2

year 2=3,456,000/270,000=12.8

2. Number of days' sales in receivables=average accounts receivable*365/annual credit sales

year 3=320,000/4,224,000*365=27.65 days

year2=270,000/3,456,000*365=28.51 days

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