Xavier Stores Companyand Lestrade Stores, Inc., are large retail department stores. Both companies offer credit to their customers through their own credit card opera- tions. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions): Xavier Lestrade Merchandise sales $28,000 $65,000 Credit card receivablesbeginning 2,750 15,000 Credit card receviablesending 2,250 11,000 a. Determine the (1) accounts receivable turnover and (2) the number of dayssales in receivables for both companies.Round to one decimal place. b. Compare the two companies with regard to their credit card policiesXavier28000/2500 = 11.2 times, 360/11.2 = 32 days

Lestrade 65000/13000 = 5 times = 360/5 = 72 days

Xavier has very tight credit policy that is why its sales is on lower side but the recovery time is good one, it means that it is not giving credit to everyone. While the lesrade credit policy is liberal one, as it gives credit to customers to increase sales but recovery time is on higher side.

. For 2010, Wiglaf Technology Company reported its most significant decline in net income in years.At the end of the year,C.S.Lewis,the president,is presented with the following condensed comparative income statement: Wiglaf Technology Company Comparative Income Statement For the Years Ended December 31, 2010and 2009 2010 2009 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $560,000 $500,000 Sales returns and allowances . . . . . . . . . . . . 37,500 25,000 ________ _________ Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $522,500 $475,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . 372,000 300,000 ________ _________ Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . $150,500 $175,000 ________ _________ Selling expenses . . . . . . . . . . . . . . . . . . . . . $ 52,000 $ 40,000 Administrative expenses . . . . . . . . . . . . . . . . 30,500 25,000 ________ _________ Total operating expenses . . . . . . . . . . . . . . . $ 82,500 $ 65,000 ________ _________ Income from operations . . . . . . . . . . . . . . . . $ 68,000 $110,000 Other income . . . . . . . . . . . . . . . . . . . . . . . . 3,000 2,000 ________ _________ Income before income tax . . . . . . . . . . . . . . $ 71,000 $112,000 Income tax expense . . . . . . . . . . . . . . . . . . . 5,500 5,000 ________ _________ Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,500 $107,000 ________ _________ ________ _________ Instructions 1. Prepare a comparative income statement with horizontal analysis for the two-year period,using 2009 as the base year.Round to one decimal place. 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).

20102009Difference% change

Sales5600005000006000012.00%

less return and allowances-37500-250001250050.00%

Net sales5225004750004750010.00%

less cost of goods sold-372000-3000007200024.00%

Gross profit150500175000-24500-14.00%

less operating expenses

selling expenses-52000-400001200030.00%

admin expenses-30500-25000550022.00%

Total operating expenses-82500-650001750026.92%

Operating income68000110000-4200038.18%

add other income30002000100050.00%

Earnings bfeore taxes71000112000-41000-36.61%

less taxes-5500-500050010.00%

Earnings after taxes65500107000-41500-38.79%

The company\s net income in the year 2010 has gone down by almost 39%, despite a increase in net sales of 10%, because the increase in cost of goods sold and operating expenses was at faster rate than the sales increase. It was 24%m, 30% and 22% in cost of goods sold, selling and admin expenses respectively.