Question

Refer to the following selected financial information from Marston Company. Compute the company's accounts receivable turnover for Year 2.
Year 2 Year 1
Accounts receivable, net 86,500 82,750
Net sales 723,000 693,000
Multiple Choice
a. 8.36.
b. 8.37.
c. 4.78.
d. 8.59.
e. 8.54.

Answer 1

Answer:

The correct option is E

Explanation:

The formula to compute the accounts receivable turnover of the company for the Year 2 is as:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

where

Net Credit Sales be $723,000

And

Average Accounts Receivable is computed as:

Average Accounts Receivable = Accounts receivable Year 1 + Accounts receivable Year 2 / 2

= $86,500 + $82,750 / 2

= $169,250 / 2

= $84,625

Putting the values in the above formula:

= $723,000 / $84,625

= 8.54