Financial Accounting: An Integrated Statements Approach, 2nd Edition

H.J. Heinz Companywas founded in 1869 at Sharpsburg, Pennsylvania, by Henry J. Heinz. The

company manufactures and markets food products throughout the world, including ketchup,

condiments and sauces, frozen food, pet food, soups, and tuna. For the fiscal years 2004 and

2003, H.J. Heinz reported the following (in thousands):

Year Ending

April 28, 2004 April 30, 2003

Net sales $8,414,538 $8,236,836

Account receivable 1,093,155 1,165,460

Assume that the accounts receivable (in thousands) were $1,125,200 at the beginning of the 2003

fiscal year.

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

b. Compute the days’ sales in receivables at the end of 2004 and 2003. Round to one decimal

place.

c. What conclusions can be drawn from these analyses regarding Heinz’s efficiency in col-

lecting receivables?

The Limited Inc.sells women’s and men’s clothing through specialty retail stores, including

Structure, The Limited, Express, Lane Bryant, and Lerner New York. The Limited sells women’s

intimate apparel and personal care products through Victoria Secret and Bath & Body Works

stores. For fiscal 2004 and 2003, The Limited reported the following (in millions):

For the Period Ending

Jan. 29, 2005 Jan. 31, 2004

Net sales $9,408 $8,934

Accounts receivable 128 112

Assume that accounts receivable (in millions) were $151 on February 1, 2003.

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

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

c. What conclusions can be drawn from these analyses regarding The Limited’s efficiency in

collecting receivables?

Use the data in Exercises 8-29 and 8-30 to analyze the accounts receivable turnover ratios of

H.J. Heinz Company and The Limited Inc.

a. Compute the average accounts receivable turnover ratio for The Limited Inc. and

H.J. Heinz Company for the years shown in Exercises 8-29 and 8-30.

b. Does The Limited or H.J. Heinz Company have the higher average accounts receivable

turnover ratio?

c. Explain the logic underlying your answer in (b).

384 Chapter 8 Receivables

Exercise 8-29

Accounts receivable turnover

and days’ sales in receivables

Goal 9

a. 2004: 7.5

Exercise 8-30

Accounts receivable turnover

and days’ sales in receivables

Goal 9

Exercise 8-31

Accounts receivable turnover

Goal 9

Problem 8-1A

Entries related to uncollectible

accounts

Goal 4

3. $837,250

GENERAL LEDGER

ACCOUNTING APPLICATION PROBLEMS

The following transactions were completed by The Corion Gallery during the current fiscal year

ended December 31:

Feb. 21 Reinstated the account of Tony Marshal, which had been written off in the preceding

year as uncollectible. Journalized the receipt of $4,050 cash in full payment of Marshal’s

account.

Mar. 31 Wrote off the $5,500 balance owed by Amos Co., which is bankrupt.

July 7 Received 35% of the $10,000 balance owed by Morton Co., a bankrupt business, and

wrote off the remainder as uncollectible.