Exercise 12-8 (Part Level Submission) (g) Open Show Work Exercise 12-8 (Part Lev

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Exercise 12-8 (Part Level Submission)

(g)

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Exercise 12-8 (Part Level Submission)

Ivanhoe Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2015 and 2016 follow. Ivanhoe Medical
Comparative Balance Sheet
As of December 31 2016 2015 Assets Current assets   Cash $359,000 $417,450   Accounts receivable, net 1,014,000 776,400   Inventory 736,000 681,000   Other current assets 381,350 247,000 Total current assets 2,490,350 2,121,850 Property, plant, & equipment, net 8,737,045 8,439,895   Total assets $11,227,395 $10,561,745 Liabilities and Stockholders’ Equity Current liabilities $3,167,000 $2,846,000 Long-term debt 3,702,600 3,892,600   Total liabilities 6,869,600 6,738,600 Preferred stock, $5 par value 58,950 58,950 Common stock, $0.25 par value 104,650 103,850 Retained earnings 4,194,195 3,660,345   Total stockholders’ equity 4,357,795 3,823,145   Total liabilities and stockholders’ equity $11,227,395 $10,561,745 Ivanhoe Medical
Comparative Income Statement and Statement of Retained Earnings
For the Year 2016 2015 Sales revenue (all on account) $10,177,200 $9,613,950 Cost of goods sold 5,612,550 5,298,800   Gross profit 4,564,650 4,315,150 Operating expenses 2,840,250 2,634,150 Net operating income 1,724,400 1,681,000 Interest expense 300,400 308,650 Net income before taxes 1,424,000 1,372,350 Income taxes (30%) 427,200 411,705 Net income $996,800 $960,645 Dividends paid   Preferred dividends 29,500 29,500   Common dividends 433,450 413,100   Total dividends paid 462,950 442,600 Net income retained 533,850 518,045 Retained earnings, beginning of year 3,660,345 3,142,300 Retained earnings, end of year $4,194,195 $3,660,345

Explanation / Answer

Average Inventory : [beginning +ending inventory]/2

        = [681000+736000]/2

          = 1417000/2

         = 708500

Average days to sell = 365 * average inventory / cost of goods sold

            = 365* 708500/ 5612550

            = 46.08    [rounded to 46 days]

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