A company reported a receivables turnover ratio of 8.0.Cost of goods sold was $350,000 and net sales were $480,000.The average accounts receivable must have been
A)$45,000
B)$120,000
C)$60,000
D)$90,000

Question

Quizplus · Accepted Answer

The formula for receivables turnover ratio is:

Receivables turnover ratio = Net sales / Average accounts receivable

We are given the receivables turnover ratio and net sales. Rearranging the formula, we get:

Average accounts receivable = Net sales / Receivables turnover ratio

Substituting the given values, we get:

Average accounts receivable = $480,000 / 8.0 = $60,000

Therefore, the answer is Choice C, $60,000.

A Company Reported a Receivables Turnover Ratio of 8