The accounts receivable turnover for Year 2 is closest to:

A) 5.95
B) 5.70
C) 1.09
D) 0.92

Question

The accounts receivable turnover for Year 2 is closest to:A) 5.95B) 5.70C) 1.09D) 0.92

Ashley Lieberenz · Accepted Answer

Final Answer : B, Explanation :  Accounts Receivable Turnover = Net Credit Sales / Average Accounts ReceivableGiven, Net Credit Sales = $480,000Accounts Receivable at beginning of Year 2 = $120,000 and at end of Year 2 = $90,000Average Accounts Receivable = (Beginning accounts receivable + Ending accounts receivable) / 2 = ($120,000 + $90,000) / 2 = $105,000Therefore, Accounts Receivable Turnover = $480,000 / $105,000 = 4.57 timesTo get the turnover ratio in terms of days, we can divide 365 by the turnover ratio as follows:Accounts Receivable Turnover in days = 365 / Accounts Receivable Turnover = 365 / 4.57 = 79.86 days = ~80 daysHence, the accounts receivable turnover for Year 2 is closest to 5.70 (365/80) which is option B. Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance*= $1,310 ÷ $230 = 5.70 (rounded)*Average accounts receivable balance = ($220 + $240)÷ 2 = $230

The accounts receivable turnover for Year 2 is closest to:

A) 5.95
B) 5.70
C) 1.09
D) 0.92

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