During the current accounting period,revenue from credit sales is $671,000.The Accounts Receivable balance is $51,480 at the beginning of the period and $52,200 at the end of the period.Which of the following statements is correct?
A) The receivables turnover ratio is 12.9.
B) On average, it takes 12.9 days to collect payment from credit customers.
C) The receivables turnover ratio is 28.3.
D) On average, the company sells its inventory every 28.3 days.

Question

Quizplus · Accepted Answer

To calculate the receivables turnover ratio, we divide the revenue from credit sales by the average accounts receivable balance.

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2
                           = ($51,480 + $52,200) / 2
                           = $51,840

Receivables turnover ratio = Revenue from credit sales / Average accounts receivable
                            = $671,000 / $51,840
                            = 12.93

Therefore, the correct statement is that the receivables turnover ratio is 12.9.

During the Current Accounting Period,revenue from Credit Sales Is $671,000