Question

With a beginning Accounts Receivable balance of $70,000, an ending balance of $140,000, and net credit sales of $800,000, what is the Accounts Receivable turnover ratio (rounded to the nearest tenth.

Answer 1

The Accounts Receivable turnover ratio is 7.6.

Explanation:

Given:

With a beginning Accounts Receivable balance of $70,000, an ending balance of $140,000, and net credit sales of $800,000.

Now, to find the Accounts Receivable turnover ratio.

Accounts Receivable balance (beginning) = $70,000.

Accounts Receivable balance (ending) = $140,000.

Net credit sales = $800,000.

So, we calculate the average net sales by putting formula:

Average net sales = Accounts Receivable balance (beginning) + Accounts Receivable balance (ending) / 2.

`Average\ net\ sales = (70,000+140,000)/(2)`

`Average\ net\ sales=(210,000)/(2)`

`Average\ net\ sales=\$105,000.`

Now, putting formula to get the Accounts Receivable turnover ratio:

Accounts Accounts Receivable turnover = Net credit sales / Average net sales

=
`(800000)/(105000)`

=
`(160)/(21)`

=
`7.619.`

So, Accounts Receivable turnover rounded to the nearest tenth = 7.6.

Therefore, the Accounts Receivable turnover ratio is 7.6.