Selected financial data for Quick Sell, Inc., a retail store, appear as follows.
ID: 2397546 • Letter: S
Question
Selected financial data for Quick Sell, Inc., a retail store, appear as follows.
a-1. Compute the gross profit percentage for both years. (Round your percentage answers to the nearest whole number. i.e. 0.1234 as 12%.)
a-2. Compute the inventory turnover for both years. (Round your answers to 1 decimal place.)
a-3. Compute the accounts receivable turnover for both years. (Round your answers to 1 decimal place.)
b. Which of the following show a positive or negative trend?
Year 2 Year 1 Sales (all on account) $ 756,000 $ 606,000 Cost of goods sold 417,000 353,000 Average inventory during the year 156,000 146,000 Average receivables during the year 150,000 100,000Explanation / Answer
Answer a-1.
Year 1:
Gross Profit = Sales - Cost of Goods Sold
Gross Profit = $606,000 - $353,000
Gross Profit = $253,000
Gross Profit Percentage = Gross Profit / Sales
Gross Profit Percentage = $253,000 / $606,000
Gross Profit Percentage = 42%
Year 2:
Gross Profit = Sales - Cost of Goods Sold
Gross Profit = $756,000 - $417,000
Gross Profit = $339,000
Gross Profit Percentage = Gross Profit / Sales
Gross Profit Percentage = $339,000 / $756,000
Gross Profit Percentage = 45%
Answer a-2.
Year 1:
Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $353,000 / $146,000
Inventory Turnover = 2.4 times
Year 2:
Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $417,000 / $156,000
Inventory Turnover = 2.7 times
Answer a-3.
Year 1:
Accounts Receivable Turnover = Sales / Average Receivables
Accounts Receivable Turnover = $606,000 / $100,000
Accounts Receivable Turnover = 6.1 times
Year 2:
Accounts Receivable Turnover = Sales / Average Receivables
Accounts Receivable Turnover = $756,000 / $150,000
Accounts Receivable Turnover = 5.0 times
Answer b.
Gross Profit Rate = Positive Trend
Inventory Turnover = Positive Trend
Accounts Receivable Turnover = Negative Trend
Growth in Net Sales = Positive Trend
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