The 2018 income statement of Anderson Medical Supply Company reported net sales
ID: 2341911 • Letter: T
Question
The 2018 income statement of Anderson Medical Supply Company reported net sales of $8 million, cost of goods sold of $4.8 million and net income of $800,000. The following table shows the company's comparative balance sheets for 2018 and 2017 in 000s) 2018 2017 AssetsS Cash Accounts receivable Inventory Property, plant, and equipment (net) $ 300 380 500 700 700 900 2,400 2,120 $4,300 $3,700 Total assets Liabilities and shareholders equity current liabilities Bonds payable Paid-in capital Retained earnings $ 960 830 1,200 1,000 670 1,200 1,000 1,140 Total liabilities and shareholders' equity $4,300 3,700 Required: 1. Calculate Anderson's turnover ratios for 2018. (Use 365 days a year. Round your answers to 2 decimal places.) Inventory turnover ratio Receivables turnover ratio Average collection period Asset turnover ratio times times days timesExplanation / Answer
a. Inventory turnover ratio = Cost of goods sold/Average inventory = $ 48,00,000 / $ 8,00,000 = 6.00 Working: Beginning Inventory $ 7,00,000 Ending Inventory $ 9,00,000 Total $ 16,00,000 Average Inventory $ 8,00,000 b. Receivable Turnover Ratio = Net Credit Sales/Average accounts receivable = $ 80,00,000 / $ 6,00,000 = 13.33 Working: Beginning Account Receivable $ 5,00,000 Ending Account Receivable $ 7,00,000 Total $ 12,00,000 Average accounts receivable $ 6,00,000 c. Average collection period = Days in a year/Receivable turnover ratio = 365 / 13.33 = 27.38 Days d. Asset Turnover ratio = Sales/Average Total assets = $ 80,00,000 / $ 40,00,000 = 2.00 Working: Beginning Total assets $ 37,00,000 Ending Total Assets $ 43,00,000 Total $ 80,00,000 Average Assets $ 40,00,000
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