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 pertinent data:
For Year Ended
July 31, 2000
Receivables, less allowance for doubtful accounts
Beginning of period (allowance
January 1, $3,000; August 1, $4,000)
End of period (allowance December 31,
$3,500; July 31, $4,100)
Required a. Compute the days’ sales in receivables for July 31, 2000, and December 31, 2000, based on the accompanying data.
b. Compute the accounts receivable turnover for the period ended July
31, 2000, and December 31, 2000. (Use year-end gross receivables.)
c. Comment on the results from (a) and (b).