Using the information provided, what is the accounts receivable turnover for the firm?
Perfect Purchase Electronics
Selected Income Statement Items, 2014
Cash Sales $1,500,000
Credit Sales $7,500,000
Total Sales $9,000,000
COGS $6,000,000
Perfect Purchase Electronics
Selected Balance Sheet Accounts
12/31/2014 12/31/2013 Change
Accounts Receivable $270,000 $240,000 $30,000
Inventory $125,000 $100,000 $25,000
Accounts Payable $110,000 $90,000 $20,000
A) 23.53 times
B) 29.41 times
C) 53.33 times
D) 60.00 times
Answer: B
Explanation: B)
1. Average accounts receivable = (beginning AR + ending AR)/2 = ($270,000 + $240,000)/2 = $255, 000.
2. Accounts Receivable Turnover = Credit Sales/Average Accounts Receivable = $7,500,000/$255,000 = 29.41 times.
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