Exercise 14-9 Lendell Company has these comparative balance sheet data: Lendell
ID: 2333333 • Letter: E
Question
Exercise 14-9 Lendell Company has these comparative balance sheet data: Lendell Company Balance Sheets December 31 2020 2019 $ 16,000 $31,000 Accounts receivable (net) 70,00061,000 51,000 201,000 182,000 $348,000 $325,000 $50,000 $60,500 Mortgage payable (15%) 100,500 100,500 Common stock, $10 par 136,000 120,500 43,500 $348,000 $325,000 Cash Inventory Plant assets (net) 61,000 Accounts payable Retained earnings 61,500 Additional information for 2020: 1. Net income was $25,700. 2. Sales on account were $406,450. Sales returns and allowances amounted to $20,000. 3. Cost of goods sold was $201,600. 4. Net cash provided by operating activities was $44,200. 5. Capital expenditures were $26,600, and cash dividends were $8,700.Explanation / Answer
a) Current ratio = Current assets/Current liabilities
= (16000+70000+61000)/50000
Current ratio = 2.94 : 1
b) Account receivable turnover = Net credit sales/Average receivable
Average receivable = (70000+61000/2) = 65500
Account receivable turnover = 386450/65500 = 5.9 Times
c) Average collection period = 365/5.9 = 61.9 Days
d) Inventory turnover = Cost of goods sold/Average inventory
Average inventory = (61000+51000/2) = 56000
Inventory turnover = 201600/56000 = 3.6 Times
e) Days in inventory = 365/3.6 = 101.4 Days
f) Free cash flow = Net cash flow from operating activities-Capital expenditure-Dividend paid
= 44200-26600-8700
Free cash flow = $8900
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