Question

Problem 3:

Google Apple’s Income Statements for 2016 and 2015. Note that Apple’s financial year ends on the last working day in September. Also google their Balance Sheets for 2016, 2015, and 2014. We suggest you use the www.nasdaq.com website, which provides all the statements you need—when you click on “Income Statement”, the balance sheet can also be accessed. Now calculate the company’s average collection period for 2016 and 2015, rounding up to the nearest day. (Note the balances in the Allowance for Doubtful Accounts were immaterial and may be ignored.) Apple offers its customers (primarily retailers) terms of net/30. Analyse Apple’s average collection period. Apple is not subject to GST.

If the balances in the Allowance for Doubtful Accounts had been material, how would that have affected your analysis in 1) above?

Answer 1

ans 1
Assuming allowance for doubtful accounts are immaterial and ignored. Hence
	2016	2015	2014
Accounts Receivable	15807	16931	17546
	(15754+53)	(16849+82)	(17460+86)
Average Accounts receivable	16369	17238.5
	(15807+16931)/2	(16931+17546)/2
Net sales	215639	233715
Average collection period
Average Accounts receivable/NEt sales*365	28	27
	(16369/215639)*365
The average collection period is within 30 days which shows that the customer
pay on time. The average collection period increased from 2015 to 2016 from one day.
But still it is within the control limits. Hence company is doung well in collecting
cash from its cutomers
ans 2
Assuming allowance for doubtful accounts were material than average collection
period would have been more. But in case of apple it is not material
	2016	2015	2014
Accounts Receivable	15754	16849	17460
Average Accounts receivable	16301.5	17154.5
Net sales	215639	233715
Average collection period
Average Accounts receivable/NEt sales*365	28	27
	(16369/215639)*365