Arnold Company had $650,000 in sales on account last year. The beginning accounts receivable balance was $24,000 and the ending accounts receivable balance was $36,000. The company's accounts receivable turnover ratio was closest to
A) 21.67.
B) 10.83.
C) 27.08.
D) 18.06.

Question

Quizplus · Accepted Answer

The accounts receivable turnover ratio is calculated by dividing net credit sales by the average accounts receivable. Net credit sales are equal to sales on account, which is $650,000. The average accounts receivable is calculated by adding the beginning and ending accounts receivable balances and dividing by 2, which is ($24,000 + $36,000) / 2 = $30,000. Therefore, the accounts receivable turnover ratio is $650,000 / $30,000 = 21.67.

Arnold Company Had $650,000 in Sales on Account Last Year