Question

The following information is from the annual financial statements of Raheem Company. Year 3 Year 2 Year 1 Net sales $ 354,000 $ 285,000 $ 341,000 Accounts receivable, net (year-end) 39,500 37,300 34,000 Compute its accounts receivable turnover for Year 2 and Year 3.

Answer 1

Answer:

Year 2:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($34,000 + $37,300) /2
Average Accounts Receivable = $35,650

Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable
Accounts Receivable Turnover = $285,000 / $35,650
Accounts Receivable Turnover = 7.99 times

Year 3:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($37,300 + $39,500) /2
Average Accounts Receivable = $38,400

Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable
Accounts Receivable Turnover = $354,000 / $38,400
Accounts Receivable Turnover = 9.22 times