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Chapter 7 solution on discussion questions

Chapter 7 solution on discussion questions - BUSI1002...

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BUSI1002 Introduction to Accounting Class Discussion Chapter 7 Suggested Solutions for Discussion Questions Brief Ex 7.7 a. Accounts receivable turnover rate (net sales / average accounts receivable): Adolph Coors : $2,842 / $114 = 25 times Anheuser-Busch : $12,262 / $615 = 20 times b. Accounts receivable days outstanding (365 days / accounts receivable turnover rate): Adolph Coors : 365 days / 25 times = 15 days Anheuser-Busch : 365 days / 20 times = 18 days c. Both of these companies have very liquid accounts receivable – that is, their receivables convert quickly into cash. However, the accounts receivable of Adolph Coors are even more liquid than those of Anheuser-Busch. Adolph Coors, on average, collects on its outstanding accounts 3 days faster than Anheuser-Busch (18 days – 15 days). Ex 7.2 a. Financial assets are cash and other assets that will convert directly into known amounts of cash. b. Cash and cash equivalents are reported in the balance sheet at face value. Marketable securities are reported at market value, whereas accounts receivable are reported at net realizable value. The common goal is to report these assets at their current value —that is, the amount of cash that each asset represents.
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