Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 8 Receivables 383

Exercise 8-25 List any errors you can find in the following partial balance sheet.

Receivables in the balance
sheet

Goal 7

Exercise 8-26

Accounts receivable turnover

Goal 9

a. 2004: 7.1

Exercise 8-27

Days’ sales in receivables

Goal 9

a. 2004: 51.5 days

Exercise 8-28

Accounts receivable turnover
and days’ sales in receivables

Goal 9

a. 2004: 5.8

Assets

Current assets:

Cash $127,500

Notes receivable $400,000

Less interest receivable 24,000 376,000

Accounts receivable $529,200

Plus allowance for doubtful accounts 42,000 571,200

Mishkie Company

Balance Sheet

December 31, 2007

May Department Storesis a large retailer that operates such brands as Hecht’s, Lord & Taylor,

Marshall Field’s, and David’s Bridal. May reported the following data (in millions) for fiscal

years ending:

Jan. 29, 2005 Jan. 31, 2004

Net sales $14,441 $13,343

Accounts receivable 2,294 1,788

Assume that accounts receivable (in millions) were $1,776 on January 31, 2003.

a. Compute the accounts receivable turnover for the year ended January 29, 2005, and the

year ended January 31, 2004. Round to one decimal place.

b. What conclusions can be drawn from these analyses regarding May Department Stores’

efficiency in collecting receivables?

Use the May Department Storesdata in Exercise 8-26 to analyze days’ sales in receivables.

a. Compute the days’ sales in receivables for the years ended January 29, 2005, and January

31, 2004. Round to one decimal place.

b. What conclusions can be drawn from these analyses regarding May Department Stores’

efficiency in collecting receivables?

Polo Ralph Lauren Corporationdesigns, markets, and distributes a variety of apparel, home

decor, accessory, and fragrance products. The company’s products include such brands as Polo

by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. For fis-

cal years 2004 and 2003, Polo Ralph Lauren reported the following (in thousands):

For the Period Ending

Oct. 31, 2004 Oct. 31, 2003

Net sales $2,380,844 $2,189,321

Accounts receivable 441,724 375,823

Assume that accounts receivable (in millions) were $353,608 at the end of fiscal 2002.

a. Compute the accounts receivable turnover for 2004 and 2003. Round to one decimal place.

b. Compute the days’ sales in receivables for 2004 and 2003. Round to one decimal place.

c. What conclusions can be drawn from these analyses regarding Ralph Lauren’s efficiency

in collecting receivables?