The following balance sheet information was provided by O'Connor Company: $\begin{array}{lrr}
\text { Assets } & \text { Year 2 } &{\text { Year 1 }} \
\text { Cash } & \$ 4,000 & \$ 2,000 \
\text { Accounts receivable } & 15,000 & 12,000 \
\text { Inventory } & \$ 35,000 & \$ 38,000
\end{array}$
Assuming that net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?
A) 18 times
B) 20 times
C) 22.5 times
D) 7.7 times

Question

The following balance sheet information was provided by O'Connor Company: $\begin{array}{lrr}
\text { Assets } & \text { Year 2 } &{\text { Year 1 }} \
\text { Cash } & \$ 4,000 & \$ 2,000 \
\text { Accounts receivable } & 15,000 & 12,000 \
\text { Inventory } & \$ 35,000 & \$ 38,000
\end{array}$ 
Assuming that net credit sales for Year 2 totaled $270,000, what is the company's most recent accounts receivable turnover?
A) 18 times
B) 20 times
C) 22.5 times
D) 7.7 times

Quizplus · Accepted Answer

The accounts receivable turnover is calculated by dividing the net credit sales by the average accounts receivable. For Year 2, net credit sales are $270,000. The average accounts receivable is calculated as $(\$15,000 + \$12,000) / 2 = \$13,500$. Therefore, the accounts receivable turnover is $\$270,000 / \$13,500 = 20$ times.

The Following Balance Sheet Information Was Provided by O'Connor Company