Accounts receivable turnover and days’ sales in receivables For two recent years, Robinhood Company reported the...

Accounts receivable turnover and days’ sales in receivables

For two recent years, Robinhood Company reported the following:

	20Y9	20Y8
Sales	$7,357,500	$6,195,000
Accounts receivable:
Beginning of year	550,000	500,000
End of year	540,000	550,000

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

Expert Solution

Ans. A	Accounts receivable turnover = Net credit sales / Average receivables
	20Y8	$6,195,000 / $525,000	11.80	times
	20Y9	$7,357,500 / $545,000	13.50	times

	*Average receivable = (Beginning accounts receivables + Ending accounts receivables) / 2
	20Y8	($500,000 + $550,000) / 2	$525,000
	20Y9	($550,000 + $540,000) / 2	$545,000

Ans. B	Days' sales in receivables = Number of days in year / Accounts receivable turnover
	20Y8	365 / 11.8	30.93	days
	20Y9	365 / 13.5	27.04	days

Ans. C	Accounts receivable turnover = Favorable
	Days' sales in receivables = Favorable

	*Increase in accounts receivable turnover ratio from previous year to current year is
	considered more efficient for the company.
	*Decrease in days sales ratio is favorable as it means that the company is taking
	less time to collect it's receivables.

ekkarill92 answered 2 years ago

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