Question

Green Thumb Garden Supplies reported the following information for 2017 and 2018.
                                                                                       2018           2017
       Assets
       Cash                                                                 $ 50,000    $ 45,000
       Accounts receivable                                             35,000        25,000
       Inventory                                                             25,000        20,000
       Property, plant, and equipment                         240,000      210,000
       Total assets                                                      $350,000    $300,000

       Liabilities and Shareholders’ Equity
       Current liabilities                                             $ 65,000    $ 60,000
       Non-current liabilities                                        110,000        90,000
       Shareholders’ equity—common                        175,000      150,000
       Total liabilities and shareholders’ equity        $350,000    $300,000

       Income statement for 2018
       Sales                                                                  $95,000
       Cost of goods sold                                               45,000
       Gross profit                                                         50,000
       Operating expenses                                             15,000
       Income before income tax                                   35,000
       Income tax expense                                               5,000
       Net income                                                        $30,000

What is the receivables turnover ratio for 2018?

	2.7 times
	2.0 times
	3.2 times
	3.8 times

Answer 1

Working Notes:
	Calculation of Average Account receivable
	Average Account Receivable = ($ 35,000 + $ 25,000) / 2
	Average Account Receivable = $ 30,000
Solution:
	Recivable turnover ratio = Sales / Average Account Recivable
	Account recivable turnover ratio =
	Sales =	$95,000
	Divide By	"/"By
	Average Account Recivable =	$30,000
	Account recivable turnover ratio =	3.2
	Receivable turnover =	3.2	Times
	Annswer =Option 3 = 3.2 Times