solomon company would like to compare its days sales in 253949

Solomon Company would like to compare its days’ sales in receivables with that of a competitor, L. Konrath Company. Both companies have had similar sales results in the past, but L. Konrath Company has had better profit results. L. Solomon Company suspects that one reason for the better profit results is that L. Konrath Company did a better job of managing receivables. L. Solomon Company uses a calendar year that ends on December 31, while L. Konrath Company uses a fiscal year that ends on July 31. Information related to sales and receivables of the two companies follows:

For Year Ended

December 31,

20XX

L. Solomon Company

Net sales …………………………………………………………….$1,800,000

Receivables, less allowance for doubtful accounts of $8,000 ………….110,000

For Year Ended

July 31, 20XX

L. Konrath Company

Net sales ………………………………………………….………..$1,850,000

Receivables, less allowance for doubtful accounts of $4,000 …………60,000

Required

a. Compute the days’ sales in receivables for both companies. (Use year-end gross receivables.)

b. Comment on the results.

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