Questions: Selected data from the financial statements of eMonstore.com for the last three years are as follows: Year 3 Year 2 Year 1 ------------ Total assets 679,000 807,000 832,000 Net credit sales 907,000 660,000 712,000 Accounts receivable 89,100 76,800 74,800 Calculate eMonstore.com's accounts receivable turnover ratio for Years 2 and 3. Round answers to two decimal places. Year 3 times Year 2 times Year 3 days Year 2 days

Solution Steps

To calculate the accounts receivable turnover ratio for Years 2 and 3, we use the formula:

\[ \text{Accounts Receivable Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}} \]

Where the average accounts receivable is calculated as:

\[ \text{Average Accounts Receivable} = \frac{\text{Accounts Receivable at the beginning of the year} + \text{Accounts Receivable at the end of the year}}{2} \]

To convert the turnover ratio to days, we use:

\[ \text{Days in Period} = \frac{365}{\text{Accounts Receivable Turnover Ratio}} \]

To find the average accounts receivable for Year 2 and Year 3, we use the formula:

\[ \text{Average Accounts Receivable} = \frac{\text{Accounts Receivable at the beginning of the year} + \text{Accounts Receivable at the end of the year}}{2} \]

For Year 2: \[ \text{Average Accounts Receivable}_{\text{Year 2}} = \frac{74,800 + 76,800}{2} = 75,800.0 \]

For Year 3: \[ \text{Average Accounts Receivable}_{\text{Year 3}} = \frac{76,800 + 89,100}{2} = 82,950.0 \]

The accounts receivable turnover ratio is calculated using the formula:

\[ \text{Accounts Receivable Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}} \]

For Year 2: \[ \text{Accounts Receivable Turnover Ratio}_{\text{Year 2}} = \frac{660,000}{75,800.0} \approx 8.707 \]

For Year 3: \[ \text{Accounts Receivable Turnover Ratio}_{\text{Year 3}} = \frac{907,000}{82,950.0} \approx 10.93 \]

To convert the turnover ratio to days, we use the formula:

\[ \text{Days in Period} = \frac{365}{\text{Accounts Receivable Turnover Ratio}} \]

For Year 2: \[ \text{Days}_{\text{Year 2}} = \frac{365}{8.707} \approx 41.92 \text{ days} \]

For Year 3: \[ \text{Days}_{\text{Year 3}} = \frac{365}{10.93} \approx 33.38 \text{ days} \]

Final Answer