Spirit Corp Reported net sales (all on credit) of $1,600,000 And cost of good sold of $1,000,000 for 2014. It's beginning balance of accounts receivable was a $150,000. They accounts receivable balance decreased by $10,000 during 2014. Rounded to 2 decimal places, what is the Spirits accounts receivable turnover rate for 2014.

1. 7.59

2. 10.32

3. 10.67

4. 11.03

Solution:

Opening receivables = $150,000

The accounts receivable balance decreased by $10,000

Hence,

Closing receivables = 150,000 - 10,000 = $140,000

Average receivables = (opening receivable + closing receivables)/2

Average receivables = ($150,000 + $140,000)/2 = $145,000

Average receivables = $145,000

Net credit sales = $1,600,000

Receivable turnover = Net credit sales/average account receivables

Average receivable = (opening receivable + closing receivables)/2

Receivable turnover = $1,600,000/$145,000

Receivable turnover = 11.03

?Option 4 is correct.