Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: The company's accounts receivable turnover for Year 2 is closest to:
A)1.06
B)5.06
C)5.21
D)0.94

Question

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement:  The company's accounts receivable turnover for Year 2 is closest to:
A)1.06 
B)5.06 
C)5.21 
D)0.94

Quizplus · Accepted Answer

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

Net Credit Sales = Sales - Sales Discounts - Sales Returns and Allowances

From the financial data provided:

Sales = $90,000
Sales Discounts = $2,000
Sales Returns and Allowances = $1,000
Net Credit Sales = $87,000

Beginning Accounts Receivable = $10,000
Ending Accounts Receivable = $12,000
Average Accounts Receivable = ($10,000 + $12,000) / 2 = $11,000

Accounts Receivable Turnover = $87,000 / $11,000 = 7.91

Therefore, the closest answer choice is C) 5.21.

Ribaudo Corporation Has Provided the Following Financial Data from Its