Exercise 16-30 Average Accounts Receivable, Accounts Receivable Turnover Ratio,

Question

Exercise 16-30 Average Accounts Receivable, Accounts Receivable Turnover Ratio, Accounts Receivable Turnover in Days

Knowlton Company had net sales of $3,906,000. Knowlton had the following balances:

January 1

December 31

Accounts receivable

$419,000

$398,100

Inventories

128,000

132,070

Required:

Note: Round answers to one decimal place.

1.Calculate the average accounts receivable.

2.Calculate the accounts receivable turnover ratio.

3.Calculate the accounts receivable turnover in days.

January 1

December 31

Accounts receivable

$419,000

$398,100

Inventories

128,000

132,070

Explanation / Answer

1. Average accounts receivable = ( 419,000 + 398,100 ) /2 = $ 408,550

2. Accounts receivable turnover ratio = Net sales / average accounts receivable = 3,906,000 /408,550 = 9.6 times

3. Accounts receivable turnover in days = 365 / 9.6 = 38 days

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