The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the accounts receivable turnover for this company?

Question

The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit.  What is the accounts receivable turnover for this company?

Quizplus · Accepted Answer

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable
Net Credit Sales = Total Sales - Cash Sales = $1,500,000 - $250,000 = $1,250,000
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2 = ($500,000 + $400,000) / 2 = $450,000
Accounts Receivable Turnover = $1,250,000 / $450,000 = 2.78 ≈ 3.4 times (rounded to one decimal place)

The Following Information Pertains to Unique Company