Question

Kelly inc. sold $930,000 worth of goods during the year, out of which $820,000 was on credit. accounts receivable at the beginning of the year amounted to $95,000 and $115,000 at the end of the year. compute kelly's accounts receivable turnover for the year.

Answer 1

Answer:

The accounts receivable turnover of Kelly for the year is 7.8

Explanation:

The formula for computing the accounts receivable turnover of Kelly for the year is as:

Accounts receivable turnover = Net Credit Sales / Average Accounts receivable

where

Net credit sales amounts to $820,000

Average accounts receivable formula is as:

Average accounts receivable = Beginning Accounts receivable + Ending Accounts receivable / 2

= $95,000 + $115,000 / 2

= $210,000 / 2

= $105,000

So, putting the values above as:

Accounts receivable turnover = $820,000 / $105,000

Accounts receivable turnover = 7.80