FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):
Sales: year 2: $39528 and year 1: $40339
Accounts receivable at end of year: year 2: 1162 and year 1: 1280
Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.
- Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
- Compute the days' sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.
- What conclusions can be drawn from (1) and (2) regarding Best Buy's efficiency in collecting receivables?
- What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for Year 2 and Year 1?
Be sure to complete all steps and sections of the problem and show all your work. Clearly label your answers, and make sure your responses to numbers 3 and 4 are in complete sentences.
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