Answered: (1-a) Compute days' sales uncollected.…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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Simon Company’s year-end balance sheets follow.

At December 31	Current Yr	1 Yr Ago	2 Yrs Ago
Assets
Cash		$	30,328	$	35,451	$	36,196
Accounts receivable, net			89,000		62,300		51,200
Merchandise inventory			113,500		83,500		56,000
Prepaid expenses			9,767		9,306		4,022
Plant assets, net			266,348		248,187		214,582
Total assets		$	508,943	$	438,744	$	362,000
Liabilities and Equity
Accounts payable		$	127,994	$	74,889	$	48,262
Long-term notes payable secured by mortgages on plant assets			96,638		101,920		80,802
Common stock, $10 par value			162,500		162,500		162,500
Retained earnings			121,811		99,435		70,436
Total liabilities and equity		$	508,943	$	438,744	$	362,000

The company’s income statements for the Current Year and 1 Year Ago, follow. Assume that all sales are on credit:

For Year Ended December 31	Current Yr	1 Yr Ago
Sales			$	661,626			$	522,105
Cost of goods sold	$	403,592			$	339,368
Other operating expenses		205,104				132,093
Interest expense		11,248				12,008
Income tax expense		8,601				7,832
Total costs and expenses				628,545				491,301
Net income			$	33,081			$	30,804
Earnings per share			$	2.04			$	1.90

(1-a) Compute days' sales uncollected.
(1-b) For each ratio, determine if it improved or worsened in the current year.

Compute days' sales uncollected.

Days' Sales Uncollected
	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days' Sales Uncollected
		/		x		=	Days' Sales Uncollected
Current Yr:		/		x		=		days
1 Yr Ago:		/		x		=		days

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(1-a) Compute days' sales uncollected. (1-b) For each ratio, determine if it improved or worsened in the current year. Compute days' sales uncollected.