Answer (A) is correct . The accounts receivable turnover equals net credit sales divided by average trade receivables (net). In Year 6, the accounts receivable turned over 19 times {$285,000 ¡Â [($16,000 ending A/R + $14,000 beginning A/R) ¡Â 2]}.Answer (B) is incorrect because Net credit sales divided by net accounts receivable at the end of Year 6 equals 17.8.
Answer (C) is incorrect because Dividing average sales of Years 5 and 6 [($285,000 + $200,000) ¡Â 2] by average receivables ($15,000) results in 16.2 times, which produces no meaningful ratio.
Answer (D) is incorrect because Dividing cost of goods sold ($150,000) for Year 6 by average accounts receivable ($15,000) results in 10 times, which produces no meaningful ratio. |
RST’s accounts receivable turnover for Year 6 is
