Buckeye Company reported the following assets accounts in its balance sheets at

Question

Buckeye Company reported the following assets accounts in its balance sheets at January 1, 2005 and December 31, 2005: January 1, 2005 December 31, 2005 Accounts receivable 40,000 ? Cash 30,000 42,000 Equipment 75,000 88,000 Inventory 50,000 ? Land 60,000 80,000 Buckeye Company's 2005 income statement reported sales revenue of $500,000. Buckeye Company also reported the following financial statement ratios for 2005: Gross profit rate 41.5% Average collection period 18.25 days Inventory turnover 4.5 Calculate Buckeye Company's total current assets at December 31, 2005.

Explanation / Answer

Receivables are 500,000* 18.25/365 = 25,000. Inventory is 500,000*(1-.415) /4.5= 65,000. So current assets are 42,000 (cash) + 65,000+25,000= 132,000.

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