Selected data pertaining to Lore Co. for the calendar year 20X4 is as follows: The accounts receivable turnover for 20X4 was 5.0 times. What were Lore's 20X4 net credit sales?

Question

Selected data pertaining to Lore Co. for the calendar year 20X4 is as follows:  The accounts receivable turnover for 20X4 was 5.0 times. What were Lore's 20X4 net credit sales?

Quizplus · Accepted Answer

Choice "A" is correct. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable. 5.0 = net credit sales / [($20,000 + $22,000)/2]. Net credit sales equal $105,000. Choice "B" is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable. Choice "C" is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable, not by year-end accounts receivable. Choice "D" is incorrect. The accounts receivable turnover ratio equals net credit sales divided by average accounts receivable, not by the sum of beginning and ending accounts receivable.

Selected Data Pertaining to Lore Co