Freiman Corporation's most recent balance sheet and income statement appear below: The accounts receivable turnover for Year 2 is closest to:
A)5.95
B)5.70
C)1.09
D)0.92

Question

Freiman Corporation's most recent balance sheet and income statement appear below:   The accounts receivable turnover for Year 2 is closest to:
A)5.95 
B)5.70 
C)1.09 
D)0.92

Quizplus · Accepted Answer

Accounts receivable turnover = Net credit sales / Average accounts receivable

From the income statement, we can see that net credit sales for Year 2 were $3,150,000.

To calculate the average accounts receivable, we need to take an average of the accounts receivable balance at the beginning and end of the year. From the balance sheet, we can see that the accounts receivable balance was $450,000 at the beginning of the year and $570,000 at the end of the year.

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2
Average accounts receivable = ($450,000 + $570,000) / 2
Average accounts receivable = $510,000

Accounts receivable turnover = $3,150,000 / $510,000
Accounts receivable turnover = 6.18

Therefore, the closest answer choice is B) 5.70.

Freiman Corporation's Most Recent Balance Sheet and Income Statement Appear