[The following information applies to the questions displayed below.] Simon Comp

Question

[The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow 2015 2013 At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net 2014 $35,240 $ 41,192 $ 42,909 89,800 62,300 56,900 110,500 82,000 57,000 10,813 356,434 323,801 276,223 11,349 4,768 Total assets $603,323 $520,106 $437,800 Liabilities and Equity Accounts payable Long-term notes payable secured $148,725 $ 87,019 57,212 by mortgages on plant assets Common stock, $1O par value Retained earnings 112,290 118,428 95,786 162,500 162,500 162,500 179,808 152,159 122,302 Total liabilities and equity $603,323 $520,106 $437,800

Explanation / Answer

2014

2014

2014

2014

2015

2014

2014

Solution: Days' Sales Uncollected = (Accounts Receivable / Net Sales) X 365 (1) Compute days' sales uncollected. Days' Sales Uncollected Choose Numerator: / Choose Denominator: x Days = Days' Sales Uncollected Accounts receivable / Net Sales x 365 = Days' Sales Uncollected 2015 89,800 / $784,320 x 365 = 41.79 days

2014

62,300 / $618,926 x 365 = 36.74 days (2) Compute accounts receivable turnover. Accounts Receivable Turnover = Net Sales /Average accounts receivable, net Accounts Receivable Turnover Choose Numerator: / Choose Denominator: = Accounts Receivable Turnover Net Sales / Average accounts receivable, net = Accounts Receivable Turnover 2015 $784,320 / 76,050 = 10.31 times

2014

$618,926 / 59,600 = 10.38 times Average accounts receivable, net calculation is shown below : 2015 2014 2013 Merchandise inventory 89,800 62,300 56,900 2015 89,800+62,300 = 152,100/2= 76,050

2014

62,300+56,900 = 119,200/2= 59,600 (3) Compute inventory turnover. Inventory turnover = Cost of goods sold / Average inventory Inventory Turnover Choose Numerator: / Choose Denominator: = Inventory Turnover Cost of goods sold / Average inventory = Inventory Turnover 2015 $478,435 / 96,250 = 4.97 times

2014

$402,302 / 69,500 = 5.79 times Average inventory calculation is shown below : 2015 2014 2013 Merchandise inventory 110,500 82,000 57,000

2015

110,500+82,000 = 192,500/2 = 96,250

2014

82,000 + 57,000 = 139,000/2 = 69,500 (4) Compute days' sales in inventory. Days' sales in inventory = (Ending inventory / Cost of goods sold) X 365 Days' Sales In Inventory Choose Numerator: / Choose Denominator: x Days = Days' Sales In Inventory Ending inventory / Cost of goods sold x 365 = Days' Sales In Inventory 2015 110,500 / $478,435 x 365 = 84.3 days

2014

82,000 / $402,302 x 365 = 74.4 days

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