D is corrent. The requirement is to compute receivables turnover at December 31, year 2. Accounts receivables turnover is calculated as net credit sales divided by average accounts receivable. Average accounts receivable is calculated as (beginning of year A/R plus end of year A/R) divided by 2. If an allowance for doubtful accounts is used, the net realizable value of accounts receivable should be used to calculate average accounts receivable. Therefore, the accounts receivable turnover is 4.7 [400,000/(80,000 + 90,000)/2].
A is incorrect. Accounts receivables turnover is calculated as net credit sales divided by average accounts receivable. Average accounts receivable is calculated as (beginning of year A/R plus end of year A/R) divided by 2. If an allowance for doubtful accounts is used, the net realizable value of accounts receivable should be used to calculate average accounts receivable. Therefore, the accounts receivable turnover is 4.7 [400,000/(80,000 + 90,000)/2].
B is incorrect. Accounts receivables turnover is calculated as net credit sales divided by average accounts receivable. Average accounts receivable is calculated as (beginning of year A/R plus end of year A/R) divided by 2. If an allowance for doubtful accounts is used, the net realizable value of accounts receivable should be used to calculate average accounts receivable. Therefore, the accounts receivable turnover is 4.7 [400,000/(80,000 + 90,000)/2].
C is incorrect. Accounts receivables turnover is calculated as net credit sales divided by average accounts receivable. Average accounts receivable is calculated as (beginning of year A/R plus end of year A/R) divided by 2. If an allowance for doubtful accounts is used, the net realizable value of accounts receivable should be used to calculate average accounts receivable. Therefore, the accounts receivable turnover is 4.7 [400,000/(80,000 + 90,000)/2].
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