Allgood Pet Supplies reported net credit sales of $3,200,000 and cost of goods sold of $2,600,000 for 2019. On January 1, 2019, accounts receivable was $450,000. Amounts owed by customers increased by $50,000 during 2019. Rounding to two decimal places, what is the company's accounts receivable turnover rate for 2019?

Question

Quizplus · Accepted Answer

Accounts receivable turnover rate = Net credit sales / Average accounts receivable

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2
Ending accounts receivable = Beginning accounts receivable + Increase in accounts receivable
Beginning accounts receivable = $450,000
Increase in accounts receivable = $50,000
Ending accounts receivable = $450,000 + $50,000 = $500,000

Average accounts receivable = ($450,000 + $500,000) / 2 = $475,000

Accounts receivable turnover rate = $3,200,000 / $475,000 = 6.74

Therefore, the best choice is C.

Allgood Pet Supplies Reported Net Credit Sales of $3,200,000 and Cost