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26 June, 00:39

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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  1. 26 June, 00:45
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    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
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