Question

Swiss Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $780,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The accounts receivable turnover ratio was
A. 9.2 times.
B. 9.0 times.
C. 8.4 times.
D. 8.8 times.

Answer 1

Answer:

B. 9.0 times.

Explanation:

Accounts Receivable Turnover (ART) = Net credit sales/ Average accounts receivable

Net credit sales = $7,200,000

Average accounts receivable  = (beginning AR - ending AR) /2

Average Accounts receivable = ($820,000 + $780,000)/2

Average AR = $800,000

Therefore Accounts receivable turnover = $7,200,000/800,000 = 9.0 times