Chapter 13

Chapter 13 - CHAPTER 13 CHAPTER 13 EXERCISE 13-1 1.Accounts...

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CHAPTER 13 CHAPTER 13 EXERCISE 13-1 1. Accounts receivable turnover: Net credit sales/Average accounts receivable: 2010: $600,000/[($150,000 + $100,000)/2] = $600,000/$125,000 = 4.8 times 2009: $540,000/[($100,000 + $80,000)/2] = $540,000/$90,000 = 6 times 2. Number of days’ sales in receivables: 2010: 360/4.8 = 75 days 2009: 360/6 = 60 days 3. The average age of a receivable in 2009 was the same number of days as the maximum credit period of 60 days. The average age in 2010 of 75 days, however, is significantly in excess of the credit period. The company needs to investigate this increase and decide whether efforts are needed to speed up the collection process. The company may decide that allowing customers more liberal payment terms has had a positive effect on sales, as evidenced by the increase in sales, and not want to press its customers for earlier payment. Conversely, the company may find that allowing an extra 15 days for payment causes cash flow problems. EXERCISE 13-2
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This note was uploaded on 04/14/2011 for the course ACCT 2101 taught by Professor Christianwurst during the Spring '08 term at Temple.

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Chapter 13 - CHAPTER 13 CHAPTER 13 EXERCISE 13-1 1.Accounts...

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