Mr. Williams, the owner of Williams Produce, wants to maintain control over accounts receivable. He understands that days' sales in receivables and accounts receivable turnover will give a good indication of how well receivables are being managed. Williams Produce does 60% of its business during June, July, and August. Mr. Williams provided the following pertinent data:
|
|
For Year Ended December 31,
2007
|
|
For Year Ended July 31,
2007
|
|
Net sales
|
$800,000
|
|
$790,000
|
|
Receivables, less allowance for doubtful accounts
|
|
|
|
|
Beginning of period (allowance
|
|
|
|
|
January 1, $3,000; August 1, $4,000)
|
50,000
|
|
89,000
|
|
End of period (allowance December 31,
|
|
|
|
|
$3,500; July 31, $4,100)
|
55,400
|
|
90,150
|
Required:
a. Compute the days' sales in receivables for July 31, 2007, and December 31, 2007, based on the accom- panying data.
b. Compute the accounts receivable turnover for the period ended July 31, 2007, and December 31, 2007. (Use year-end gross receivables.)
c. Comment on the results from (a) and (b).