Question

Current Attempt in Progress Windsor Company had accounts receivable of $170,000 on January 1, 2022. The only transactions that affected accounts, receivable during 2022 were net credit sales of $1,487,500, cash collections of $1,368,500, and accounts written off of $34,000. Compute the accounts receivable turnover for 2022. (Round answer to 1 decimal place, e.g. 2.5.) Accounts receivable turnover eTextbook and Media Attempts: 0 of 3 used

Answer 1

The accounts receivable turnover for 2022 is 5.1.

Step-by-step explanation:

The accounts receivable turnover ratio measures how quickly a company collects cash from its credit customers. To calculate the accounts receivable turnover for 2022, we will divide the net credit sales by the average accounts receivable balance.

Net credit sales = $1,487,500
Beginning accounts receivable = $170,000
Accounts written off = $34,000
Ending accounts receivable = Beginning accounts receivable + Net credit sales - Cash collections - Accounts written off
Accounts receivable turnover = Net credit sales / Average accounts receivable

Using the given information, the average accounts receivable balance can be calculated as (Beginning balance + Ending balance)/2. Substituting the values into the formula, we get:
Accounts receivable turnover = $1,487,500 / (($170,000 + ($170,000 + $1,487,500 - $1,368,500 - $34,000))/2)

Simplifying the equation: Accounts receivable turnover = $1,487,500 / ($170,000 + $255,500) = 5.1 (rounded to 1 decimal place).