Final answer:
The accounts receivable turnover for Year 1 is approximately 10.71, and for Year 2 is approximately 11.82, indicating an efficient and improving collection of credit sales.
Step-by-step explanation:
Accounts Receivable Turnover Calculation:
The accounts receivable turnover is calculated by dividing total net sales by the average accounts receivable during the period. For Year 1, with sales of $1,524,240 and an average accounts receivable ((Beginning AR + Ending AR) / 2 i.e., ($149,650 + $135,050) / 2 = $142,350), the turnover is $1,524,240 / $142,350, which is approximately 10.71 times. For Year 2, the sales were $1,553,440, and the average accounts receivable was calculated as (($135,050 + $127,750) / 2 = $131,400), making the turnover to be $1,553,440 / $131,400, approximately 11.82 times.
Businesses need to monitor their accounts receivable turnover as it measures the efficiency of the company in collecting its credit sales and extending credits to customers. An increasing trend, as seen from Year 1 to Year 2, is often regarded as a positive sign of financial health.