Miller Company had $120,000 in sales on account last year. The beginning accounts receivable balance was $8,000 and the ending accounts receivable balance was $14,000. The company's accounts receivable turnover ratio was closest to
A) 5.45.
B) 8.57.
C) 10.91.
D) 15.00.

Question

Quizplus · Accepted Answer

Accounts receivable turnover ratio can be calculated using the formula:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Where,
Net Credit Sales = Total Sales - Cash Sales
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

Given,
Total Sales = $120,000
Beginning Accounts Receivable = $8,000
Ending Accounts Receivable = $14,000

Therefore,
Net Credit Sales = $120,000 - $0 = $120,000
Average Accounts Receivable = ($8,000 + $14,000) / 2 = $11,000

Accounts Receivable Turnover Ratio = $120,000 / $11,000 = 10.91

Hence, the closest answer is C) 10.91.

Miller Company Had $120,000 in Sales on Account Last Year