Questions: XYZ's receivables turnover is 18 x. The accounts receivable at year-end are 420,000. The average collection period is 90 days. What was the sales figure for the year assuming all sales are on credit?

Solution Steps

To find the sales figure for the year, we can use the formula for receivables turnover, which is:

\[ \text{Receivables Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}} \]

Given:

• Receivables Turnover = \( 18x \)
• Average Accounts Receivable = \( \$420,000 \)
• Average Collection Period = 90 days

We need to find the Net Credit Sales (Sales Figure for the year).

1. Use the given receivables turnover formula to express Net Credit Sales in terms of the given values.
2. Calculate the sales figure using the formula.

We are given the following values:

• Receivables Turnover: \( 18 \)
• Average Accounts Receivable: \( \$420,000 \)

The formula for Receivables Turnover is given by:

\[ \text{Receivables Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}} \]

Rearranging this formula to solve for Net Credit Sales, we have:

\[ \text{Net Credit Sales} = \text{Receivables Turnover} \times \text{Average Accounts Receivable} \]

Substituting the known values into the equation:

\[ \text{Net Credit Sales} = 18 \times 420,000 \]

Calculating this gives:

\[ \text{Net Credit Sales} = 7,560,000 \]

Final Answer