2. Check My Work eBook Exercise 7-16 Analyzing Accounts Recelvable for Two Compa

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2. Check My Work eBook Exercise 7-16 Analyzing Accounts Recelvable for Two Companies The annual reports of Delta, Inc. and SunnyDay Company, two manufacturers of computers, reveal the information below for the current year (amounts in millions), Delta sells custom-order personal computers, primarily to individuals. SunnyDay sells higher-end computers and Internet software, primarily to businesses. Delta $61,133 6,152 7,693 SunnyDay $13,873 2,702 2,964 Accounts Receivable, Jary1.. a. Compute the accounts receivable turnover for each company, Round your answers to one decimal place. Delta, Inc SunnyDay b. Compute the average number of days that accounts receivable are outstanding for each company. Round your answers to one decimal place. Assume a 365-day year Delta, Inc. SunnyDay 8.8 times per year 4.9 times per year 41.3 days 74.5 days Delta, Inc. has higher y accounts receivable turnover and lower average number of days that accounts receivable are oustanding than sunnyDay. This is most likely because Delta's customers pay with a credit card or cash whereas SunnyDay's customers finance their purchases Hide Feedback Partially Correct Check My Work Icon Key

Explanation / Answer

Delta SunnyDay Sales revenue 61133 13873 Accounts receivable Beginning 6152 2702 Accounts receivable Ending 7693 2964 Average Accounts receivable 6922.5 2833 (Beginning AR+Ending AR)/2 Accounts receivable Turnover 8.8 4.9 (sales revenue / Average accounts receivable) Average Number of days AR Outstanding 41.47 74.54 (Number of days in a year /Accounts receivable Turnover) Req a: Accounts receivbale turnover: Delta 8.83 Sunnyday: 4.9 Req b: Average number of days AR outstanding: Delta 41.5 days Sunnyday: 74.54 days Req c: Delta Inc has HIGHER accounts receivable turnover and LOWER average number of days AR outstanding than Sunyday. This is most likely because Delta's customer pay with a credit card or cash whereas Sunnyday customer finance their purchases.

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