Practice Exam - Chapter 7
Reporting & Analyzing Receivables and Investments
Dr. Fred Barbee
Solution to Short-Problem #1
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ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 7 Reporting & Analyzing Receivables and Investments Dr. Fred Barbee Solution to Short-Problem #1 |
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Short Problem #1
A company reports the following results in its financial statements:
Year 3 |
Year 2 |
Year 1 |
|
| Net Sales | $2,500,000 |
$2,050,000 |
$1,900,000 |
| Accounts Receivable, Ending Balance | 175,000 |
167,000 |
165,000 |
Calculate this company's accounts receivable turnover for Year 2 and Year 3. Compare these two results and give a possible explanation for any significant change.
Solution
| Year 2000 Accounts Receivable Turnover: $2,050,000 / ($165,000 + $167,000)/2 = 12.3 times Year 3 Accounts Receivable Turnover: $2,500,000 / ($167,000 + $175,000)/2 = 14.6 times |