Lasiter Corp.reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2016.On January 1, 2016, accounts receivable was $250,000.Amounts owed by customers increased by $20,000 during 2016.Rounding to two decimal places, what is Lasiter's accounts receivable turnover rate for 2016?
A) 8.33
B) 8.00
C) 7.69
D) 7.41

Question

Quizplus · Accepted Answer

Accounts receivable turnover rate = Net Credit Sales / Average Accounts Receivable

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable)/2

Beginning Accounts Receivable = $250,000
Ending Accounts Receivable = Beginning Accounts Receivable + Increase in Amounts owed during 2016 = $250,000 + $20,000 = $270,000

Average Accounts Receivable = ($250,000 + $270,000)/2 = $260,000

Accounts Receivable Turnover Rate = $2,000,000 / $260,000 = 7.69 (rounded to two decimals)

Therefore, the best choice is C.