Question

Dorchester Company had the following balances at the end of 2018 and 2019 respectively: Net Credit Sales - $955,000 for 2018 and $1,022,000 for 2019. Accounts Receivable - $88,000 for 2018 and $111,000 for 2019. Allowance for Doubtful Accounts - $4,000 for 2018 and 5,500 for 2019 Calculate the accounts receivable turnover ratio to one decimal place.

Answer 1

Answer:

The turnover ratio is 10.7

Explanation:

Turnover ratio may be defined as the ration of net credit sales with the average accounts receivable.

The formula used to calculate the turnover ratio is :

$\text{Turn over ratio}= \frac{\text{net credit sales}}{\text{average account receivables}}$

Net credit sales (2019)=  $1,022,000

Average account receivables = $\frac{(88,000-4000)+(111,000-5,500)}{2}$

=94750.

$\text{Turn over ratio}=[tex]\frac{1,022,000}{94750}$

= 10.7

Hence, The turn over ratio is 10.7.