Allgood Pet Supplies reported net credit sales of $3,200,000 and cost of goods sold of $2,600,000 for 2013. On January 1, 2013, accounts receivable was $450,000. Amounts owed by customers increased by $50,000 during 2013. Rounding to two decimal places, what is the company's accounts receivable turnover rate for 2013?

Question

Quizplus · Accepted Answer

Accounts receivable turnover rate = Net credit sales / Average accounts receivable
Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2
Ending accounts receivable = Beginning accounts receivable + Increase in accounts receivable
Ending accounts receivable = $450,000 + $50,000 = $500,000
Average accounts receivable = ($450,000 + $500,000) / 2 = $475,000
Accounts receivable turnover rate = $3,200,000 / $475,000 = 6.74 (rounded to two decimal places)

Allgood Pet Supplies Reported Net Credit Sales of $3,200,000 and Cost