Question

Calculating the Average Accounts Receivable, the Accounts Receivable Turnover Ratio, and the Accounts Receivable Turnover in Days Last year, Laurel, Inc. had net sales of $9,420,000 and cost of goods sold of $4,812,000. Laurel had the following balances: January 1 December 31 Accounts receivable $725,000 $775,000 Inventory 450,000 425,000 Required:

Note: Round answers to one decimal place. Assume 365 days per year.

1. Calculate the average accounts receivable.
$

2. Calculate the accounts receivable turnover ratio.
times

3. Calculate the accounts receivable turnover in days.
days

Answer 1

(1) $750,000

(2) 12.56 times

(3) 29.06 days

Step-by-step explanation:

1. Average accounts receivable:

= (Beginning Accounts receivable + Ending Accounts receivable) ÷ 2

= (725,000 + 775,000) ÷ 2

= $750,000

2. Accounts receivable turnover ratio:

= Net sales ÷ Average account receivable

= $9,420,000 ÷ $750,000

= 12.56 times

3. Accounts receivable turnover in days:

= 365 ÷ accounts receivable turnover ratio

= 365 ÷ 12.56

= 29.06 days