The Rye Corporation has provided the following information: Total sales were $1,240,000. Beginning net accounts receivable was $49,000. Ending net accounts receivable was $63,000. Sales returns and allowances totaled $108,000. What was Rye's receivables turnover ratio?

Question

Business

Cade Terrell

16 February, 15:19

The Rye Corporation has provided the following information: Total sales were $1,240,000. Beginning net accounts receivable was $49,000. Ending net accounts receivable was $63,000. Sales returns and allowances totaled $108,000. What was Rye's receivables turnover ratio?

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Answers (1)

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Lilliana Herring · Answer 1

The receivables turnover ratio of Rye is 20.21

Explanation:

The receivables turnover ratio of Rye is computed as:

Receivables turnover ratio = Net Sales / Average Accounts Receivable

where

Net Sales = Sales - Sales returns and allowances

Net Sales = $1,240,000 - $108,000

Net Sales = $1,132,000

Average Accounts Receivable = Beginning Net Accounts Receivable + Ending Net Accounts Receivable / 2

Average Accounts Receivable = $49,000 + $63,000 / 2

Average Accounts Receivable = $112,000 / 2

Average Accounts Receivable = $56,000

Putting the values above:

Receivables turnover ratio = $1,132,000 / $56,000

Receivables turnover ratio = 20.21