Question

The following data are taken from the financial statements of McKee Technology Inc. Terms of all sales are 2/10, n/55.

	2016		2015		2014
Accounts receivable, end of year	$149,600		$157,000		$164,200
Net sales on account	827,820		786,940

a. For 2015 and 2016, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. Round answers to one decimal place. Assume a 365-day year.

	2016		2015
1. Accounts receivable turnover		?	?
2. Number of days' sales in receivables	?	days	?	days

Answer 1

• All working forms part of the answer
• Workings

Working		2016	2015
A	Beginning Accounts receivables	$          157,000.00	$        164,200.00
B	Ending Accounts receivables	$          149,600.00	$        157,000.00
C = A+B	Total	$          306,600.00	$        321,200.00
D = C/2	Average Accounts receivables	$          153,300.00	$        160,600.00
E	Net sales on account	$          827,820.00	$        786,940.00
F = E/D	Accounts receivables Turnover	5.4	4.9

Working		2016	2015
A	No. of Days	365	365
B	Accounts receivables Turnover	5.4	4.9
C =A/B	No. of days sales in receivables	67.6	74.5

• Answers

	2016		2015
1. Accounts receivable turnover	5.4	times	4.9	times
2. Number of days' sales in receivables	67.6	days	74.5	days