hapter 12 Homework- Problem 12-6A Use Rati, × c I ezio.mheducation.com/hm.tpx Th
ID: 2542133 • Letter: H
Question
hapter 12 Homework- Problem 12-6A Use Rati, × c I ezio.mheducation.com/hm.tpx The following income statement and balance sheets for Virtual Gaming Systems are provided AL GAMING SYSTEMS Income Statement For the year ended December 31, 2018 Net sales Cost of goods sold $3,086,000 1,960,000 Gross profit 1126,000 Expenses: Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense $868,000 32,000 9,000 20,000 58,000 Total expenses 987,000 Net income $139,000 VIRTLIAL GAMING SYSTEMSExplanation / Answer
Solution:
Calculation of Ratios
Numerator
/
Denominator
=
Ratio
1)
Receivable Turnover Ratio
Net Credit Sales
/
Average Accounts Receivable, net
=
Receivable Turnover Ratio
Accounts Receivable Turnover
$3,086,000
/
$80,500
[(91000 + 70,000)/2]
=
38.3
times
2)
Average Collection Period
Number of days in a year
/
Receivable Turnover Ratio
=
Average Collectoin Period
in days
Average Collection Period
365
/
38.3
=
9.5
days
3)
Inventory Turnover
Cost of Goods Sold
/
Average Inventory
=
Inventory Turnover
times
Inventory Turnover
$1,960,000
/
$130,000
[(115,000 + 145,000)/2]
=
15.1
times
4)
Average Days in Inventory
Number of Days in a year
/
Inventory Turnover Ratio
=
Average Days in Inventory
in days
Average Days in Inventory
365
/
15.1
=
24.2
days
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Numerator
/
Denominator
=
Ratio
1)
Receivable Turnover Ratio
Net Credit Sales
/
Average Accounts Receivable, net
=
Receivable Turnover Ratio
Accounts Receivable Turnover
$3,086,000
/
$80,500
[(91000 + 70,000)/2]
=
38.3
times
2)
Average Collection Period
Number of days in a year
/
Receivable Turnover Ratio
=
Average Collectoin Period
in days
Average Collection Period
365
/
38.3
=
9.5
days
3)
Inventory Turnover
Cost of Goods Sold
/
Average Inventory
=
Inventory Turnover
times
Inventory Turnover
$1,960,000
/
$130,000
[(115,000 + 145,000)/2]
=
15.1
times
4)
Average Days in Inventory
Number of Days in a year
/
Inventory Turnover Ratio
=
Average Days in Inventory
in days
Average Days in Inventory
365
/
15.1
=
24.2
days
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