The following account balances are taken from the records of the Faraway Travel Agency: Faraway extends credit
Question:
The following account balances are taken from the records of the Faraway Travel Agency:
Faraway extends credit terms requiring full payment in 60 days, with no discount for early payment.
Required
1. Compute Faraway's accounts receivable turnover ratio for 2017 and 2016.
2. Compute the number of days' sales in receivables for 2017 and 2016. Assume 360 days in a year.
3. Comment on the efficiency of Faraway's collection efforts over the two-year period
December 31 2017 $150,000 2017 $600,000 il Accounts receivable $100,000 2016 $540,000 $80,000 Net credit sales
Step by Step Answer:
1 Accounts receivable turnover Net credit salesAverage accounts receivable 2017 6000001500...View the full answer
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1337491471
10th edition
Authors: Gary A. Porter, Curtis L. Norton
Related Video
Days sales outstanding (DSO) is a measure of the average number of days that it takes a company to collect payment for a sale. DSO is often determined on a monthly, quarterly, or annual basis. To compute DSO, divide the average accounts receivable during a given period by the total value of credit sales during the same period and multiply the result by the number of days in the period being measured.
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