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On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances:
Accounts Debit Credit
Cash $ 24,900
Accounts Receivable 14,100
Allowance for Uncollectible Accounts $ 1,800
Supplies 3,000
Notes Receivable (6%, due in 2 years) 25,000
Land 77,500
Accounts Payable 8,800
Common Stock 101,000
Retained Earnings 32,900
Totals $ 144,500 $ 144,500
During January 2021, the following transactions occur:
January 2 Provide services to customers for cash, $40,100.
January 6 Provide services to customers on account, $77,400.
January 15 Write off accounts receivable as uncollectible, $1,400.
January 20 Pay cash for salaries, $31,900.
January 22 Receive cash on accounts receivable, $75,000.
January 25 Pay cash on accounts payable, $6,000.
January 30 Pay cash for utilities during January, $14,200.
Analyze how well 3D Family Fireworks manages its receivables:
a-1. Calculate the receivables turnover ratio for the month of January (Hint: For the numerator, use total services provided to customers on account). (Round your final answer to 1 decimal place.)
a-2. If the industry average of the receivables turnover ratios for the month of January is 4.4 times, is the company collecting cash from customers more or less efficiently than other companies in the same industry

Sagot :

anthougo

Answer:

3D Family Fireworks

a-1.  The receivables turnover ratio for the month of January is:

= 5.3 times.

a-2. With the industry average of the receivables turnover ratios for the month of January of 4.4 times, 3D Family Fireworks is collecting cash from customers more efficiently than other companies in the same industry.

Explanation:

a) Data and Calculations:

Accounts                                Debit          Credit

Cash                                 $ 24,900

Accounts Receivable           14,100

Allowance for Uncollectible Accounts  $ 1,800

Supplies                                3,000

Notes Receivable (6%, due in 2 years) 25,000

Land                                   77,500

Accounts Payable                                    8,800

Common Stock                                    101,000

Retained Earnings                               32,900

Totals                          $ 144,500 $ 144,500

January 2021 Transactions Analysis:

January 2 Cash, $40,100 Service Revenue $40,100

January 6 Accounts receivable $77,400 Service Revenue $77,400

January 15 Allowance for Uncollectible Accounts $1,400 Accounts receivable $1,400

January 20 Salaries Expense $31,900 Cash $31,900

January 22 Cash $75,000 Accounts receivable, $75,000

January 25 Accounts payable, $6,000 Cash $6,000

January 30 Utilities Expenses $14,200 Cash $14,200

Accounts Receivable

Accounts                                Debit          Credit

Beginning balance             $ 14,100

Service Revenue                  77,400

Allowance for Uncollectible Accounts   $1,400

Cash                                                        75,000

Ending balance                                        15,100

Credit Service Revenue = 77,400

Average accounts receivable = $14,600 ($14,100 + $15,100)/2

Receivables Turnover ratio = $77,400$14,600 = 5.3 times

Industry average of receivables turnover ratio = 4.4 times

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