It takes K’s Boutique an average of 53 days to sell its inventory and an average of 16.8 days to collect its accounts receivable.The firm has sales of $942,300 and costs of goods sold of $692,800.What is the accounts receivable turnover rate? Assume a 365-day year.
A)23.69
B)11.41
C)21.73
D)24.23
E)19.55

Question

It takes K&#8217;s Boutique an average of 53 days to sell its inventory and an average of 16.8 days to collect its accounts receivable.The firm has sales of $942,300 and costs of goods sold of $692,800.What is the accounts receivable turnover rate? Assume a 365-day year.
A)23.69
B)11.41
C)21.73
D)24.23
E)19.55

Quizplus · Accepted Answer

Accounts receivable turnover rate = Sales / Accounts receivable
To find accounts receivable, we use the average collection period formula:
Average accounts receivable = (Accounts receivable / 2) = (16.8/365) x Sales
Average accounts receivable = $38,724.66

Therefore, the accounts receivable turnover rate = $942,300 / $38,724.66 = 24.3 times
Since we are asked to round to two decimal places, the answer is 21.73, which is choice (C).

It Takes K’s Boutique an Average of 53 Days to Sell