In the Cases & Projects section at the back of Chapter 9 in your textbook, find and complete problem “CP 9-6 Accounts receivable turnover and days’ sales in receivables.” Be sure to complete all steps and sections of the problem and show all your work. Clearly label your answers, and make sure your responses to numbers 3 and 4 are in complete sentences. Submit all your documentation for the problem to the dropbox for grading.

SEE BELOW

CP 9-6

Accounts receivable turnover and days’ sales in receivables

Best Buy is a specialty retailer of consumer electronics, including personal computers, entertainment software, and appliances. Best Buy operates retail stores in addition to the Best Buy, Media Play, On Cue, and Magnolia Hi-Fi websites. For two recent years, Best Buy reported the following (in millions):



Assume that the accounts receivable (in millions) were $1,308 at the beginning of fiscal Year 1.

1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places.
2. Compute the days’ sales in receivables at the end of Year 2 and Year 1. Use 365 days and round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding Best Buy’s efficiency in collecting receivables?
4. What assumption did we make about sales for the Best Buy ratio computations that might distort the ratios and therefore cause the ratios not to be comparable for Year 2 and Year 1?

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