Question

Confection Bakery Supply began the year with an Accounts Receivable balance of $25,000. Net sales (all on account) for the year amounted to $100,000 and no cash discount was offered. During the year $70,000 was collected on accounts receivable. What is the accounts receivable turnover ratio

Answer 1

The accounts receivable turnover ratio for Confection Bakery Supply is 2.5, calculated by dividing the net sales of $100,000 by the average accounts receivable of $40,000.

Step-by-step explanation:

The accounts receivable turnover ratio is calculated by dividing total net sales by the average accounts receivable during the period. For Confection Bakery Supply, the beginning accounts receivable balance was $25,000, and net sales were $100,000. The ending accounts receivable balance would be the beginning balance plus net sales minus collections, which equals $25,000 + $100,000 - $70,000, totaling $55,000 at year-end. The average accounts receivable is then ($25,000 + $55,000) / 2, which is $40,000. So, the accounts receivable turnover ratio is $100,000 divided by the average accounts receivable of $40,000, yielding a ratio of 2.5.

Answer 2

Accounts receivable turnover= 2.105

Step-by-step explanation:

Accounts receivable turnover ratio is a measure of how well a business is giving credit and recovering debt. It is the number of times a business recovers it's account recievables in a year. Shows how effectively a business uses its assets.

Average accounts receivable = (25,000+70,000)/2

Average account receivable=

$47,500

Account receivable turnover= Net credit sales/Average accounts receivable

Accounts receivable turnover= 100,000/47,500

Accounts receivable turnover= 2.105