A partial balance sheet and income statement for King Corporation follow: King C
ID: 2461417 • Letter: A
Question
A partial balance sheet and income statement for King Corporation follow:
King Corporation
Partial Balance Sheet
December 31, 2011
Assets
Current assets:
Cash $ 33,493
Marketable securities 215,147
Trade receivables, less allowance of $6,000 255,000
Inventories, LIFO 523,000
Prepaid expenses 26,180
Total current assets $ 1,052,820
Liabilities
Current liabilities:
Trade accounts payable $ 103,689
Notes payable (primarily to banks) and commercial paper 210,381
Accrued expenses and other liabilities 120,602
Income taxes payable 3,120
Current maturities of long-term debt 22,050
Total current liabilities $ 459,842
King Corporation
Partial Income Statement
For Year Ended December 31, 2011
Net sales $ 3,050,600
Miscellaneous income 45,060
$ 3,095,660
Costs and expenses:
Cost of sales $ 2,185,100
Selling, general, and administrative expenses 350,265
Interest expense 45,600
Income taxes 300,000
2,880,965
Net income $ 214,695
Compute the following:
a.Working capital f. Accounts receivable turnover in days
b. Current ratio g. Days’ sales in inventory
c. Acid-test ratio h. Inventory turnover in days
d. Cash ratio i. Operating cycle
e. Days’ sales in receivables
Please show work especially for accounts receivable turnover in days and inventory turnover in days
Explanation / Answer
1. Working Capital = Current Asset - Current Liabilities = $1052820 - $459842 = 592978 $ 2. Current Ratio = Current Asset/Current Liabilities = $1052820/$459842 = 2.289526 3. Acid Test Ratio = Total Current Asset - Inventory - Prepaid Exp Current Liabilities = $1052820-$523000-$26180 $459842 = 503640 = 1.095246 $459842 4. Cash Ratio = Cash + Cash Equivalents+Invested Funds Current Liabilities = $33493+ $215147 $459842 = 248640 = 0.540707 $459842 E. Days sales in receivable = Account Receivable *365 Net Credit Sales = $255000 *365 $3050600 = 0.083590113 *365 = 30.51035 F. Accounts receivable turnover in days = Net Credit Sales Account Receivables = $3050600 $255000 = 11.96313725 G. Days Sales of Inventory = Inventory *365 Cost of sales = $523000 *365 $2185100 = 0.24 *365 = 87.36 H. Inventory turnover in days = Sales/Inventory = $3050600 $523000 = 5.83
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