Question

The financial statements of the Phelps Manufacturing Company reports net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?
a. 10.0 times
b. 15.0 times
c. 7.5 times
d. 5.0 times

Answer 1

Answer:

Average receivables =  10 times

so correct option is a. 10.0 times

Explanation:

given data

net sales = $600,000

at the beginning accounts receivable = $80,000

end of year accounts receivable  = $40,000

to find out

What is the accounts receivable turnover

solution

we get here Accounts receivables turnover that is express as

Accounts receivables turnover = Net sales ÷  Average receivables     ..............1

we know here

put here value we get

Average receivables = (Beginning receivables + Ending receivables)  ÷ 2

Average receivables  = $\frac{80000+40000}{2}$

Average receivables  = 60000

so from equation 1

Average receivables =  $\frac{600,000}{60000}$

Average receivables =  10 times

so correct option is a. 10.0 times