The following selected account balances were taken from XYZ Company's general ledgers during 2021: January 1,...

The following selected account balances were taken from XYZ Company's
general ledgers during 2021:

                        January 1, 2021       December 31, 2021
Accounts receivable           44,000                  ?
Inventory                     53,000                88,000

For 2021, XYZ Company had an average collection period of 50 days,
an inventory turnover ratio of 4.75, and a gross profit of $79,400.

Calculate the accounts receivable balance at December 31, 2021.

Expert Solution

$69,500

Average collection period of 50 days

Average collection period =	365 / Accounts Receivable turnover ratio
50 days =	365 / Accounts Receivable turnover ratio
Accounts Receivable turnover ratio =	7.3	times


Inventory turnover ratio 4.75 times

Inventory turnover ratio =	Cost of goods sold/Average Inventory
4.75 =	Cost of goods sold/($53,000 + $88,000)/2
Cost of goods sold =	$334,875

Gross Profit $79,400
then Sales = COGS + Gross Profit
Sales = $334,875 + $79,400
Sales = $414,275

Now, we have
Accounts Receivable turnover ratio =	7.3 times
Accounts Receivable trunover ratio =	Sales / Avg. Accounts receivable
7.3 =	$414,275/Avg. Accounts receivable
Avg. Accounts receivable =	$56,750

So, Let say X be the accounts receivable for December 31, 2021
($44,000 + X)/2 = $56,750
X = $69,500

ekkarill92 answered 2 years ago

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