Question : A firm made credit Revenue from Operations (Credit Sales) of Rs.5,40,000 during the year. If the trade receivables turnover ratio is 9 times, The value of opening and closing trade Receivables, if the closing trade receivables are more by Rs.8,000 than the opening trade receivable will be
Option 1: Opening trade receivable Rs 56,000 closing trade receivable Rs 64,000
Option 2: Opening trade receivable Rs 64,000 closing trade receivable Rs 56000
Option 3: Opening trade receivable Rs 24000 closing trade receivable Rs 32000
Option 4: None of the above
Correct Answer: Opening trade receivable Rs 56,000 closing trade receivable Rs 64,000
Solution :
Answer =
Opening trade receivable Rs 56,000 closing trade receivable Rs 64,000
Trade receivable turnover ratio=$\frac{Net credit sales}{Average trades receivable}$
⇒ 9 times= $\frac{5,40,000}{Average trade receivables}$
⇒ Average trade receivables=$\frac{5,40,000}{9}$
⇒ Average trade receivables= 60,000.
Let op. trade receivable=X
Closing trade receivable=X+8000
Average trade receivable=$\frac{X+X+8000}{2}$
⇒ 60,000=$\frac{X+X+8000}{2}$
⇒ 2X+8000=1,20,000
⇒ X=1,20,000/2= 56,000.
Opening trade receivables= Rs 56,000
Closing trade receivables = 56,000+8,000= Rs 64,000.
Hence, the correct option is 1.
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