A Recent Annual Report for Kirova Company Contained the Following

question 89

Essay

A recent annual report for Kirova Company contained the following data: $$\begin{array} { l r r } &{ \text { (in millions) } } \\& \underline { 2014 } & \underline { 2013 } \\\text { Accounts receivable } & \$ 2,023 & \$ 1,866 \\\text { Less: Allowance for doubtful accounts } & 50 & 52 \\\text { Net accounts receivable } & 1,976 & 1,814 \\\text { Net sales (all are on credit) } & 18,158 &\end{array}$$ Required:
A. Calculate the accounts receivable turnover ratio.
B. Calculate the average days' sales in receivables for 2014 (rounded to the nearest day).
C. Explain the meaning of each number.

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Definitions:

LIFO Liquidation

An accounting method where the most recently produced items are recorded as sold last, potentially distorting the cost of goods sold and profitability during inflationary periods.

Bonus Contracts

Agreements that specify the conditions under which bonuses will be awarded to employees or partners, often tied to performance metrics.

LIFO Conformity Rule

A requirement that if the Last-In, First-Out (LIFO) inventory valuation method is used for tax purposes, it must also be used for financial reporting.

SEC

Securities and Exchange Commission, an independent federal agency responsible for enforcing federal securities laws and regulating the securities industry and stock and options exchanges in the United States.