Question

The following information is from the annual financial statements of Raheem Company. Year 3 Year 2 Year 1 Net sales $ 405,140 $ 335,280 $ 388,000 Accounts receivable, net (year-end) 44,800 41,400 34,800 (1) Compute its accounts receivable turnover for Year 2 and Year 3.

Answer 1

Account receivable turnover (Year 2) = 8.8 times.

Account receivable turnover (Year 2) = 9.4 times.

Step-by-step explanation:

We know,

Accounts receivable turnover = Net credit sales ÷ Average accounts receivable.

Given,

Net sales,

Year 1 = $388,000

Year 2 = $335,280

Year 3 = $405,140

Accounts receivable,

Year 1 = 34,800

Year 2 = 41,400

Year 3 = 44,800

Account receivable turnover (Year 2) = $335,280 ÷ [(34,800 + 41,400) ÷ 2]

Account receivable turnover (Year 2) = $335,280 ÷ ($76,200 ÷ 2)

Account receivable turnover (Year 2) = $335,280 ÷ $38,100

Account receivable turnover (Year 2) = 8.8 times.

In year 3,

Account receivable turnover = $405,140 ÷ [(41,400 + 44,800) ÷ 2]

Account receivable turnover = $405,140 ÷ ( 86,200 ÷ 2)

Account receivable turnover = $405,140 ÷ 43,100

Account receivable turnover = 9.4 times.