Question

Financial statement data for years ending December 31 for Chiro-Solutions Company follow: 20Y2 20Y1 Sales $2,912,000 $2,958,000 Accounts receivable: Beginning of year 300,000 280,000 End of year 340,000 300,000 a. Determine the accounts receivable turnover for 20Y2 and 20Y1. If required, round the final answers to one decimal place.

Answer 1

Answer:

(i) 9.1

(ii) 10.2

Explanation:

Accounts receivable turnover for 20Y2:

Average accounts receivable:

= (Beginning account receivable + Ending accounts receivable) ÷ 2

= (300,000 + 340,000) ÷ 2

= $320,000

Accounts receivable turnover ratio;

= Net annual credit sales ÷ Average accounts receivable

= $2,912,000 ÷  $320,000

= 9.1

Accounts receivable turnover for 20Y1:

Average accounts receivable:

= (Beginning account receivable + Ending accounts receivable) ÷ 2

= (280,000 + 300,000) ÷ 2

= $290,000

Accounts receivable turnover ratio;

= Net annual credit sales ÷ Average accounts receivable

= $2,958,000 ÷  $290,000

= 10.2