Question

Utica Company’s net accounts receivable was $250,000 at December 31, 2016, and $300,000 at December 31, 2017. Net cash sales for 2017 were $100,000. The accounts receivable turnover for 2017 was 5.0, which was computed from net credit sales for the year.

Required: What was Utica's total net sales for 2017?

Answer 1

$1475000

Step-by-step explanation:

accounts receivables turnover =
`(credit sales)/(average net accounts receivable)` --- equation 1

accounts receivables turnover = 5

average accounts receivable = ( accounts receivable in 2016 + accounts receivable in 2017) / 2

average accounts receivable =
`(250000 + 300000)/(2)` =
`(550000)/(2)` = $275000

back to equation 1

credit sales = accounts receivable turnover * average accounts receivable

= 5 * 275000 = $1375000

Utica's total net sales for 2017

credit sales + cash sales

= $1375000 + $100000

= $1475000

Answer 2

Total Net Sales = $1475000

Step-by-step explanation:

Average Accounts Receivables = (250000 + 300000) / 2

Average Accounts Receivables = 275000

Accounts Receivables Turnover = Credit sales / Average Accounts Receivables

So,

5 = Credit Sales / 275000

5 * 275000 = Credit Sales

Credit Sales = $1375000

Total Sales = Credit Sales + Cash Sales

Total Sales = 1375000 + 100000 = $1475000