The financial information below presents selected information from the financial
ID: 2491680 • Letter: T
Question
The financial information below presents selected information from the financial statements of Pelican Company. Sales revenue during the current year was $13,520,300 and cost of goods sold was $8,909,695. All of Pelican's sales are made on account and are due within 30 days.
Calculate the following:
Current ratios as of the end of the current and prior year. (Round your answers to 2 decimal places.)
Current Year | Prior Year
Current Ratio: __________ | _________
Calculate the receivables turnover ratio for the current year. (Round your answer to 2 decimal places.)
Receivables Turnover: ________________
Calculate the days to collect for the current year. (Round your intermediate calculations and final answers to 2 decimal place.)
Days to Collect: _______________
Calculate the inventory turnover ratio for the current year. (Round your answer to 2 decimal places.)
Inventory Turnover Ratio: _________________
The financial information below presents selected information from the financial statements of Pelican Company. Sales revenue during the current year was $13,520,300 and cost of goods sold was $8,909,695. All of Pelican's sales are made on account and are due within 30 days.
Explanation / Answer
Answer: a)
Current ratio = Current assets / Current liabilities
Current year: 8,345,100/6,891,000 = 1.21
Prior Year: 8,475,030/ 7,515,300 = 1.13
Answer: b)
Receivable turnover ratio = Net credit sales/Average accounts receivables
Average accounts receivable = (Prior year A/R + Current Year A/R)/2
Average accounts receivables = (4640000 + 3809000)/2 = 8449000 / 2 = 4224500
Receivable turnover ratio = 13520300 / 4224500 = 3.20
Answer: c)
Days to collect = No. of days/ Receivable turnover ratio
Days to collect = 365 days / 3.20 = 114.06 days
Answer: d)
Inventory turnover ratio = Cost of goods sold / Average inventory
Average inventory = (Prior year inventory + Current year inventory)/ 2
Average inventory = (929360 + 1250440)/2 = 1089900
Inventory turnover ratio = 8909695 / 1089900 = 8.17
Answer: e)
Days to sell = No. of days/ Inventory turnover ratio
Days to sell = 365 days / 8.17 = 44.68 days
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