The Following Account Balances Are Taken from Ferguson Sports at December

question 145

Essay

The following account balances are taken from Ferguson Sports at December 31. $$\begin{array} { | l | r | r | } \hline & 2016 & 2015 \\\hline \text { Accounts receivable } & 18,020 & 23,450 \\\hline \text { Net sales } & 163,500 & 157,100 \\\hline\end{array}$$ Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

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Definitions:

Bargain Purchase Option

An option in a lease agreement that allows the lessee to purchase the leased asset at a price significantly below its fair market value at the end of the lease term.

Capital Lease Obligation

A financial commitment that a lessee must recognize on their balance sheet for a lease considered a purchase of an asset rather than a rental, due to its terms meeting certain criteria.

Initial Direct Costs

Expenses that are directly associated with acquiring or originating a loan or insurance contract, or other financial instruments, that are recognized at the inception of the contract.

Operating Lease

An Operating Lease is a lease agreement that allows for the use of an asset but does not convey rights of ownership of the asset.