It takes The Corner Store an average of 51 days to sell its inventory and 32 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable turnover rate?
A) 11.23
B) 11.41
C) 11.78
D) 12.23
E) 12.55

Question

Quizplus · Accepted Answer

Accounts receivable turnover rate = (Net sales) / (Average accounts receivable)

To find average accounts receivable, we need to divide the total value of accounts receivable by 2, since this assumes that accounts receivable are turned over twice in a year (since a year has 365 days).

Average accounts receivable = (Accounts receivable / 2) = (32/365) x $568,700 = $49,673.15

Net sales = Gross sales - Discounts - Returns and allowances
Net sales = $568,700 - 0 - 0 = $568,700

Accounts receivable turnover rate = ($568,700) / ($49,673.15) = 11.41

Therefore, the answer is B, 11.41.

It Takes the Corner Store an Average of 51 Days