Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 26

Accounts receivable turnover and days' sales in receivables
Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (Costco.com) and in Canada (Costco.ca). For two recent years, Costco reported the following (in millions):

Assume that the accounts receivable (in thousands) were $1,321 at the beginning of Year 1.
1. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place.
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 Costco's efficiency in collecting receivables
4. Given the nature of Costco's operations, do you believe Costco's accounts receivable turnover ratio would be higher or lower than a typical manufacturing company, such as H.J. Heinz Company Explain.