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30 December, 10:02

Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2014. On January 1, 2014, accounts receivable was $250,000. Amounts owed by customers increased by $20,000 during 2014. Rounding to two decimal places, what is Lassiter's accounts receivable turnover rate for 2014

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  1. 30 December, 11:19
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    The correct answer is 7.69.

    Explanation:

    According to the scenario, the given data are as follows:

    Net credit sales = $2,000,000

    Cost of goods sold = $1,400,000

    Account receivable = $250,000

    During year Account receivable = $250,000 + $20,000 = $270,000

    So, we can calculate the accounts receivable turnover rate by using following formula:

    Turnover rate = Net credit sales : Average account receivable

    Where Average account receivable = ($250,000 + $270,000) : 2

    = $260,000

    So, by putting the value we get,

    Turnover rate = $2,000,000 : $260,000

    = 7.69

    Hence, the accounts receivable turnover rate is 7.69.
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