Rags to Riches Selected data from the financial statements are provided below: 2
ID: 2548049 • Letter: R
Question
Rags to Riches
Selected data from the financial statements are provided below:
2020
2019
Accounts Receivable
$ 120,000
$ 76,000
Inventory
24,000
32,000
Total Assets
900,000
760,000
Net Sales
760,000
540,000
Cost of Goods Sold
320,000
420,000
Refer to Rags to Riches. Which of the following would be found through ratio analysis of the company’s financial statements?
a.
Total assets decreased 18.4% during 2020.
b.
Accounts receivable increased $22,000 during 2020.
c.
Cost of goods sold increased $50,000 or 23.8% in 2020.
d.
The accounts receivable turnover ratio is 7.76 in 2020.
2020
2019
Accounts Receivable
$ 120,000
$ 76,000
Inventory
24,000
32,000
Total Assets
900,000
760,000
Net Sales
760,000
540,000
Cost of Goods Sold
320,000
420,000
Explanation / Answer
Average AR=(120,000+76000)/2=$98000
accounts receivable turnover=Net sales/Average AR
=(760,000/98000)=7.76 (Approx)
Hence the correct option is D.
NOTE:Total assets increased for 2020;AR increased by $44000 and COGS decreased by $100,000.
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