Hint: Question may yield negative answers. Assets (Millions) Liabilities and own
ID: 2814025 • Letter: H
Question
Hint: Question may yield negative answers.
Assets (Millions)
Liabilities and owners equity (Millions)
Cash 4000
Accounts Payable 900
Inventory 600
Accrued operating expense 400
Accounts Receivable 1500
Notes Payable 3500
Fixed assets 6000
Long Term Debt 2000
Shareholders Equity 5300
Total 12100
Total 12100
Income Statement (Millions)
Revenues 7000
COGS 4500
Operating Expenses 900
Depreciation 600
Interest 400
Taxes 500
Net Profit 100
1. After negotiating with its customers, Sullo was able in decrease its DSO by six days. What will be the resulting change in Sullo's accounts receivable? Round intermediate steps to the nearest whole day and your final answer to the nearest whole dollar.
Assets (Millions)
Liabilities and owners equity (Millions)
Cash 4000
Accounts Payable 900
Inventory 600
Accrued operating expense 400
Accounts Receivable 1500
Notes Payable 3500
Fixed assets 6000
Long Term Debt 2000
Shareholders Equity 5300
Total 12100
Total 12100
Explanation / Answer
Step 1 Find out the present DSO i.e. days sales outstanding DSO = [Accounts receivables / Total Credit sales] * Number of days in a year DSO = [$1500 / $7000] * 365 days DSO = 78 days Step 2 Now the Sullo reduced the present DSO by 6 days.Hence revised DSO will be 72 days. Using the above DSO equation , we can find out the accounts receiable based on revised DSO. DSO = [Accounts receivables / Total Credit sales] * Number of days in a year 72 = [Accounts receivables / $7000] * 365 504000 = Accounts receivables * 365 Revised Accounts receivables will be = $1381 Step 3 Change in Accounts receivables = $1500 - $1381 = $119 (decrease)
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