Question

Income statement: 2018

Sales $2,500,000
Cost of goods sold $1,300,000
Net income $200,000

Balance sheets:
2018
Accounts receivable $300,000
Total assets $2,000,000
Total shareholders' equity $900,000

2017
Accounts receivable $200,000
Total assets $1,800,000
Total shareholders' equity $700,000

The accounts receivable turnover for 2018 is:

Answer 1

The accounts receivable turnover for 2018 is calculated by dividing the net credit sales of $2,500,000 by the average accounts receivable of $250,000, resulting in a turnover ratio of 10 times.

Step-by-step explanation:

The question asks to calculate the accounts receivable turnover for the year 2018 based on the given information from the income statement and balance sheets. The accounts receivable turnover ratio measures how efficiently a company collects revenue from its credit sales. It is calculated by dividing total net credit sales by the average accounts receivable during the period.

To find the accounts receivable turnover for 2018, we use the formula:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Assuming that all sales are on credit, the Net Credit Sales are $2,500,000 for 2018. The Average Accounts Receivable is calculated as: ($300,000 + $200,000) / 2 = $250,000. Therefore, the accounts receivable turnover for 2018 equals to:

Accounts Receivable Turnover = $2,500,000 / $250,000 = 10 times.