The following balance sheet information was provided by O'Connor Company: If net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?
A)18 times
B)20 times
C)22.5 times
D)7.7 times

Question

The following balance sheet information was provided by O'Connor Company:  If net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?
A)18 times 
B)20 times 
C)22.5 times 
D)7.7 times

Quizplus · Accepted Answer

Accounts receivable turnover = Net credit sales / Average accounts receivable.
Using the balance sheet information, we can calculate the average accounts receivable as (beginning accounts receivable + ending accounts receivable) / 2:
(40,000 + 50,000) / 2 = 45,000
Accounts receivable turnover = 270,000 / 45,000 = 6 times per year
The company's most recent turnover is likely to be closer to the end of Year 2, thus we can use the ending accounts receivable of $50,000 to get a more accurate answer:
Accounts receivable turnover = 270,000 / 50,000 = 5.4 times per year, which is closest to option B: 20 times.

The Following Balance Sheet Information Was Provided by O'Connor Company