Based on the Following Data and Using a 365-Day Year

question 23

Essay

Based on the following data and using a 365-day year, compute a) the accounts receivable turnover and b) the number of days' sales in receivables for year 2 to 2 decimal places. The industry average turnover is 20 times during the year, and the number of days' sales in receivables averages 25. c) Comment on this situation.

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Definitions:

Average Cost Method

An inventory costing method where the cost of goods sold and ending inventory is determined by averaging the cost of all similar items available.

FIFO

An inventory valuation method that assumes the first items placed into inventory are the first sold, standing for "First In, First Out."

LIFO

Last In, First Out, an inventory valuation method where the goods purchased last are the first to be sold.

Safeguarding Inventory

Measures and controls put in place to protect a company's inventory from loss, theft, or damage.