Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The accounts receivable turnover for Year 2 is closest to:
A)6.62
B)1.10
C)6.32
D)0.91

Question

Excerpts from Sydner Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The accounts receivable turnover for Year 2 is closest to:
A)6.62 
B)1.10 
C)6.32 
D)0.91

Quizplus · Accepted Answer

Accounts receivable turnover = Sales on account ÷ Average accounts receivable

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) ÷ 2

From the balance sheet, we can see that:
Beginning accounts receivable = $780
Ending accounts receivable = $780 + $205 - $250 = $735

Average accounts receivable = ($780 + $735) ÷ 2 = $757.50

Accounts receivable turnover = $1,390 ÷ $757.50 = 1.835

Therefore, the accounts receivable turnover for Year 2 is closest to 6.32 (rounding to two decimal places). Thus, Option C is the correct answer.

Excerpts from Sydner Corporation's Most Recent Balance Sheet Appear Below