Use the financial data shown below to calculate the following ratios: (a) Accoun

ID: 2504925 • Letter: U

Question

Use the financial data shown below to calculate the following ratios:

(a) Accounts Receivable Turnover

(b) Days' sales uncollected

(d) Days; sakes in inventory

Income statement data

Sales (all on credit) $650,000

Cost of goods sold $425,000

Income before taxes 78,000

Net income 54,6000

Ending Balances Beginning Balances

Cash 19,500 15,000

Accounts Receivable (net) 65,000 60,000

Inventory 71,5000 64,500

Plant and equipment (net) 195,000 183,900

Total Assets $351,000 $323,400

Current Liabilities $62,400

Long-Term notes payable $97,500

Average accounts receivable = (beginning accounts receivable + ending accounts receivable)/2 = (65,000 + 60,000)/2 = 62,500

Average inventory = (beginning inventory + ending inventory)/2 = (71,500 + 64,500)/2 = 68,000

a. Accounts receivable turnover = net credit sales / average accounts receivable = 650,000 / 62,500 = 10.4 times

b. Days sales uncollected = 365 / accounts receivable turnover = 365 / 10.4 = 35.10 days

c. Inventory turnover = COGS / average inventory = 425,000 / 68,000 = 6.25 times

d. Days sales in inventory = 365 / inventory turnover = 365 / 6.25 = 58.4 days

Hope this helped ! Let me know in case of any queries.

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