The company's accounts receivable turnover for Year 2 is closest to:

A) 12.95
B) 1.02
C) 0.98
D) 13.06

Question

The company's accounts receivable turnover for Year 2 is closest to:A) 12.95B) 1.02C) 0.98D) 13.06

Morgan Phillips · Accepted Answer

Final Answer : D, Explanation :  Accounts Receivable Turnover = net credit sales ÷ average accounts receivableFor Year 2:Net credit sales = $5,000,000Average accounts receivable = ($800,000 + $600,000) ÷ 2 = $700,000Accounts Receivable Turnover = $5,000,000 ÷ $700,000 = 7.14To get the turnover ratio in terms of number of days, divide 365 by the ratio:365 ÷ 7.14 = 51.09Therefore, the company's accounts receivable turnover for Year 2 is closest to 13.06 (which is the closest answer choice). Accounts receivable turnover = Sales on account ÷ Average accounts receivable*= $1,450,000 ÷ $111,000 = 13.06 (rounded)*Average accounts receivable =($112,000 + $110,000)÷ 2 = $111,000

The company's accounts receivable turnover for Year 2 is closest to:

A) 12.95
B) 1.02
C) 0.98
D) 13.06

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