AE14-7 Bennis Company has the following comparative balance sheet data. BENNIS C

Question

AE14-7


Bennis Company has the following comparative balance sheet data.
BENNIS COMPANY
Balance Sheets
December 31

2012 2011
Cash $ 14,630 $ 29,970
Receivables (net) 70,370 59,560
Inventories 59,860 50,070
Plant assets (net) 199,500
180,100

$344,360
$319,700


Accounts payable $50,190 $55,050
Mortgage payable (15%) 99,670 99,670
Common stock, $10 par 140,400 119,700
Retained earnings 54,100
45,280

$344,360
$319,700



Additional information for 2012:

Net income was $25,280.

Sales on account were $410,300. Sales returns and allowances were $20,800.

Cost of goods sold was $197,700.

The allowance for doubtful accounts was $2,140 on December 31, 2012, and $2,050 on December 31, 2011.

Compute the following ratios at December 31, 2012. (a) Current. (b) Acid-test. (c) Receivables turnover. (d) Inventory turnover. (Round answers to 1 decimal place, e.g. 10.5.)

(a) Current ratio : 1
(b) Acid-test ratio : 1
(c) Receivables turnover times
(d) Inventory turnover times

Explanation / Answer

(a) Current ratio = Current assets/Current liablilities = = >2.9:1 (b) Acid-test ratio = (Current assets - Inventory)/Current liabilities ==> 1.7:1 (c) Receivables turnover = Net credit sales/Average net receivables = = > 6 times (d) Inventory turnover = COGS/Average inventory = => 3.6 times

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