Question

Magneto Company had net credit sales during the year of $1,350,000 and cost of goods sold of $810,000. The balance in accounts receivable at the beginning of the year was $180,000, and the end of the year it was $120,000. What was the accounts receivable turnover?a. 5.6,

b. 9.0,
c. 7.5,
d. 11.3

Answer 1

The accounts receivable turnover ratio is 9 times and option B is the correct answer.

Step-by-step explanation:

The accounts receivables turnover ratio is a measure to check the efficiency of a company in extending and collecting the credit. The accounts receivable turnover ratio can be calculated as follows,

Accounts receivable Turnover = Net Sales / Average Accounts receivable

Where Average accounts receivable = (Opening balance of Accounts Receivable + Ending balance of Accounts receivable) / 2

Average accounts receivable = (180000 + 120000) / 2 = $150000

The accounts receivable turnover = 1350000 / 150000 = 9.0 times