19) The accounts receivable turnover ratio measures ________.
A) a company’s ability to pay its current liabilities with its current assets
B) how many days it takes, on average, to collect receivables
C) how many days it takes, on average, to sell the inventory
D) the number of times a company collects the average accounts receivable balance in a year
20) Logan Sales provides the following information:
Net credit sales: $790,000
Beginning net accounts receivable: $43,000
Ending net accounts receivable: $20,000
Calculate the accounts receivable turnover ratio. (Round your answer to the nearest whole number.)
A) 18 times
B) 25 times
C) 40 times
D) 37 times
21) Modern Clothing Store reported the following selected items at June 30, 2019 (previous year – 2018 –
amounts are also given as needed):
Cash
$ 80,000
Accounts Receivable, net:
June 30, 2019
June 30, 2018
45,000
53,000
Accounts Payable
55,000
Cost of Goods Sold
288,000
Merchandise Inventory
June 30, 2019
June 30, 2018
70,000
90,000
Net Credit Sales Revenue
480,000
Long-Term Assets
220,000
Long-Term Liabilities
140,000
Other Current Assets
150,000
Other Current Liabilities
130,000
Short-term Investments
40,000
Compute Modern’s accounts receivable turnover ratio for the year ending June 30, 2019. Show your
computations. (Round the answer to 2 decimal places.)
22) Days’ sales in receivables is also called the collection period.
23) The days’ sales in receivables indicates the number of days it takes to collect the average level of
accounts receivable.
24) The days’ sales in receivables for Beckham Sales is 35. The days’ sales in receivables for Xanadu
Company is 25. This suggests that Xanadu is having greater difficulty than Beckham in collecting its
accounts receivable.
25) The accounts receivable turnover ratio for a merchandiser is 9.6 times. Calculate the days’ sales in
receivables for the merchandiser. (Round your answer to the nearest day.)
A) 34 days
B) 38 days
C) 29 days
D) 41 days
26) A company has net credit sales of $91,000, beginning net accounts receivable of $22,000 and ending
net accounts receivable of $19,000. Calculate the days’ sales in receivables. (Round any intermediate
calculations to two decimal places, and your final answer to the nearest whole day.)
A) 73 days
B) 52 days
C) 91 days
D) 82 days
27) Days’ sales in receivables measures ________.
A) how many days it takes to order and receive inventory
B) how many days it takes to collect the average level of accounts receivable
C) how many days it takes to sell inventory
D) the number of times a company collects the average accounts receivable balance in one year
28) A company has net credit sales of $1,200,000, beginning net accounts receivable of $290,000, and
ending net accounts receivable of $201,000. What is the days’ sales in accounts receivable? (Round any
intermediate calculations to two decimal places, and your final answer to the nearest whole day.)
A) 75 days
B) 149 days
C) 61 days
D) 88 days
29) Both Smith Enterprises and Jones Enterprises have credit terms of 2/10, net 30. The days’ sales in
receivables are 40 for Smith Enterprises and 35 for Jones Enterprises. Analyze this information.
30) Edgewood Home Improvement Store reported the following selected items at June 30, 2019 (previous
year – 2018 – amounts are also given as needed):
Cash
$ 80,000
Accounts Receivable, net:
June 30, 2019
June 30, 2018
125,000
153,000
Accounts Payable
45,000
Cost of Goods Sold
475,000
Merchandise Inventory
June 30, 2019
June 30, 2018
320,000
280,000
Net Credit Sales Revenue
1,200,000
Long-Term Assets
520,000
Long-Term Liabilities
140,000
Other Current Assets
150,000
Other Current Liabilities
130,000
Short-term Investments
200,000
Compute Edgewood‘s days’ sales in receivables for the year ending June 30, 2019. Show your
computations.
31) Mansfield Office Furniture Store reported the following selected items at December 31, 2019 (previous
year – 2018 – amounts are also given as needed):
Cash
$ 50,000
Accounts Receivable, net:
Dec. 31, 2019
Dec. 31, 2018
75,000
63,000
Accounts Payable
55,000
Cost of Goods Sold
375,000
Merchandise Inventory
Dec. 31, 2019
Dec. 31, 2018
240,000
220,000
Net Credit Sales Revenue
820,000
Long-Term Assets
320,000
Long-Term Liabilities
240,000
Other Current Assets
135,000
Other Current Liabilities
125,000
Short-term Investments
80,000
Compute Mansfield’s
(a) acid-test ratio;
(b) accounts receivable turnover ratio (round to 2 decimal places); and
(c) days’ sales in receivables for 2019 (round to the nearest day). Show your computations.
32) For each of the following ratios, provide the formula and state what the ratio tells the financial
statement user.
(a) acid-test ratio
(b) accounts receivable turnover ratio
(c) days’ sales in receivables