Posted: July 19th, 2016
EXERCISE 7-18: Cash Collections – Direct Method
Emily Enterprises’ comparative balance sheets included accounts receivable of $224,600 at December 31, 2011, and $205,700 at December 31, 2012. Sales reported on Emily’s 2012 income statement amounted to $2.25 million. What is the amount of cash collections that Emily will report in the Operating Activities category of its 2012 statement of cash flows assuming that the direct method is used?
PROBLEM 7-3: Accounts Receivable Turnover for Coca-Cola and PepsiCo
The following information was summarized from the 2010 annual report of The Coca-Cola Company:
Trade accounts receivable, less allowances of $48 and $55, respectively:
December 31, 2010 4430
December 31, 2009 3758
Net operating revenues for the year ended December 31:
The following information was summarized from the 2010 annual report of PepsiCo:
Accounts and notes receivable, net
December 25, 2010 6323
December 26, 2009 4624
Net revenue for the year ended:
December 25, 2010 57838
December 26, 2009 43232
1. Calculate the accounts receivable turnover ratios for Coca-Cola and PepsiCo for 2010.
2. Calculate the average collection period, in days, for both companies for 2010. Comment on the reasonableness of the collection periods for these companies considering the nature of their business.
3. Which company appears to be performing better? What other information should you consider in determining how these companies are performing?
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