Question

Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $760,000, respectively. The accounts receivable turnover?

Answer 1

Account Receivable Turnover ratio = 12.5

Account Receivable in days = 29 days

Step-by-step explanation:

Account Receivable Turnover ratio = Net credit sales / Average account receivable

= 8,500,000 / (600,000+760,000 / 2)

= 8,500,00 / 680,000

= 12.5

Account Receivable in days = 365 / receivable turnover ratio

= 365 / 12.5

= 29.2 days

So, customers take 29 days to pay their debt.

Answer 2

The accounts receivable turnover ratio was 12.5

Step-by-step explanation:

In order to find the accounts receivable turnover we need to divide the net credit sales of a company by it's average accounts receivable. In this question we are already given the net credit sales which are 8,500,000, and we need to find the average accounts receivables. We can do that by adding the starting and ending year balance accounts receivables and dividing it by 2.

Average receivables= (600,000+760,000)/2= 680,000

Accounts receivable turnover= 8,500,000/680,000=12.5