Guttery Corporation has provided the following financial data from its balance sheet: Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.The company's accounts receivable turnover for Year 2 is closest to:
A) 12.95
B) 1.02
C) 0.98
D) 13.06

Question

Guttery Corporation has provided the following financial data from its balance sheet:  Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000.The company's accounts receivable turnover for Year 2 is closest to:
A) 12.95 
B) 1.02 
C) 0.98 
D) 13.06

Quizplus · Accepted Answer

Accounts receivable turnover = net credit sales / average accounts receivable

Average accounts receivable = (beginning accounts receivable + ending accounts receivable) / 2

We are given the value of net credit sales, i.e. $1,450,000. We need to find the average accounts receivable.

Beginning accounts receivable can be found from the Year 1 balance sheet: $80,000.

Ending accounts receivable can be found from the Year 2 balance sheet: $70,000.

Average accounts receivable = ($80,000 + $70,000) / 2 = $75,000

Accounts receivable turnover = $1,450,000 / $75,000 = 19.33

Therefore, the closest option among the given choices is D) 13.06.

Guttery Corporation Has Provided the Following Financial Data from Its