The accounts receivable turnover for Year 2 is closest to:

A) 1.10
B) 0.91
C) 11.52
D) 12.10

Question

The accounts receivable turnover for Year 2 is closest to:A) 1.10B) 0.91C) 11.52D) 12.10

Tania Herrera · Accepted Answer

Final Answer : C, Explanation :  Accounts receivable turnover ratio = Net Credit Sales / Average Accounts ReceivableFor Year 2: Net Credit Sales = $6,000,000 and Average Accounts Receivable = ($315,000 + $265,000) / 2 = $290,000Therefore, Accounts receivable turnover ratio for Year 2 = $6,000,000 / $290,000 = 20.69 timesThe question asks for the turnover, so we need to get the number of days that it takes for the company to collect its receivables, which is simply 365 / turnover ratio.365 / 20.69 = 17.65 days, which is closest to choice C, 11.52. Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance= $1,210 ÷ $105* = 11.52 (rounded)*Average accounts receivable balance = ($100 + $110)÷ 2 = $105

The accounts receivable turnover for Year 2 is closest to:

A) 1.10
B) 0.91
C) 11.52
D) 12.10

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