Assuming a 365 day year, Bush Industries calculated an average of 47 days to collect its accounts receivable in 2012. During 2012, Bush's accounts receivable turnover rate:
A) Was approximately 7.77.
B) Was equal to 47 times its average accounts receivable.
C) Was approximately 0.13.
D) Can't be determined from this information alone.

Question

Quizplus · Accepted Answer

The accounts receivable turnover rate is calculated by dividing the total net credit sales by the average accounts receivable. Since the average collection period is given as 47 days, the average accounts receivable can be calculated by multiplying the average daily sales by the number of days in the collection period (365 days). So, if we assume net credit sales are equal to total sales, then the accounts receivable turnover rate would be calculated as follows:

Accounts Receivable Turnover Rate = Total Net Credit Sales / Average Accounts Receivable 
= Total Sales / (Average Daily Sales x Collection Period) 
= Total Sales / (Total Sales/365 x 47) 
= 365/47 
= 7.77

Therefore, the answer is A) approximately 7.77.

Assuming a 365 Day Year, Bush Industries Calculated an Average