Financial Accounting: An Integrated Statements Approach, 2nd Edition

Apple Computer Inc.designs, manufactures, and markets personal computers and related per-

sonal computing and communicating solutions for sale primarily to education, creative, con-

sumer, and business customers. Substantially all of the company’s net sales over the last five

years are from sales of its Apple Macintosh line of personal computers and related software and

peripherals. For the fiscal years ending September 25, 2004 and September 27, 2003, Apple re-

ported the following (in millions):

Assume that the accounts receivable (in millions) were $565 at the beginning of the 2003 fis-

cal year.

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


2. Compute the days’ sales in receivables at the end of 2004 and 2003.


3. What conclusions can be drawn from (1) and (2) regarding Apple’s efficiency in collecting
   receivables?


4. Using the Internet, access the Apple September 25, 2004, 10-K filing with the Securities and
   Exchange Commission. You can use the PricewaterhouseCoopers Web site at http://
   edgarscan.pwcglobal.comto search for company filings by name. Search the 10-K filing for
   the term “receivable.” Identify one company that had accounts receivable with Apple at the
   end of fiscal years 2004 and 2003.

Earthlink, Inc., is a nationwide Internet Service Provider (ISP). Earthlink provides a variety of

services to its customers, including narrowband access, broadband or high-speed access, and

Web hosting services. For the years ending December 31, 2004 and 2003, Earthlink reported the

following (in thousands):

392 Chapter 8 Receivables

Case 8-2

Accounts receivable

turnover and days’ sales in

receivables

Case 8-3

Accounts receivable

turnover and days’ sales

in receivables

Case 8–4

Account receivable turnover

Year Ending

Sept. 25, 2004 Sept 27, 2003

Net sales $8,279 $6,207

Accounts receivable at end of year 774 766

Year Ending December 31,

2004 2003

Net sales $1,382,202 $1,401,930

Accounts receivable at end of year 30,733 35,585

Assume that the accounts receivable (in thousands) were $53,496 at January 1, 2003.

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


2. Compute the days’ sales in receivables at the end of 2004 and 2003.


3. What conclusions can be drawn from (1) and (2) regarding Earthlink’s efficiency in collect-
   ing receivables?


4. Given the nature of Earthlink’s operations, do you believe Earthlink’s accounts receivable
   turnover ratio would be higher or lower than a typical manufacturing company, such as
   BoeingorKellogg’s? Explain.

General Electric (GE)is one of the largest and most diversified industrial corporations in the

world. GE’s products include major appliances, lighting products, medical diagnostic imaging

equipment, motors, locomotives, and commercial and military aircraft jet engines. Through the