Question

Using the information given below, calculate the company's Accounts Receivable Turnover for the year.

Cash	$130,000
Accounts Receivable (end of year)	75,000
Inventory	198,000
Prepaid Insurance	2,000
Accounts Payable (end of year)	47,200
Common Stock	35,000
Retained Earnings	175,000
Accounts Receivable (beginning of year)	70,800
Accounts Payable (beginning of year)	53,480
Inventory (beginning of year)	214,807
Sales	391,478
Cost of Goods Sold	265,872
Gross Profit	125,606
Net Income	34,825

	a.	0.19
	b.	5.22
	c.	5.37
	d.	0.186
	e.	5.53

Answer 1

Answer: The correct answer is C i.e. 5.37 times

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($70,800 + $75,000) / 2
Average Accounts Receivable = $72,900

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $391,478 / $72,900
Accounts Receivable Turnover = 5.37 times