The 2018 income statement of Adrian Express reports sales of S18,612,000, cost o
ID: 2586158 • Letter: T
Question
The 2018 income statement of Adrian Express reports sales of S18,612,000, cost of goods sold of $11,696,000, and net income of $1,680,000. Balance sheet information is provided in the following table ADRIAN EXPRESS Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Current assets Cash Accounts receivable Inventory 5 680,000 1.560,000 1.960,000 4,880,000 840,000 1.080,000 1.480,000 4,320,000 Long-term assets Total assets 5 9,080,000 $7.720,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Common stockk Retained earnings 5 1,940,000 1,740,000 2.380.000 2.480,000 1.920,000 2.840,000 1,580,000 1.920,000 Total liabilities and stockholders' equity 59,080,000 $7.720,000 Industry averages for the following four risk ratios are as follows Average collection period Average days in inventory Current ratio Debt to equity ratico 25 days 60 days 2 to 1 50% Required: 1. Calculate the four risk ratios listed above for Adrian Express in 2018. (Use 365 days in a year. Round your answers to 1 decimal place.) Risk Ratios Average collection period Average days in inventory Current ratio Debt to equity ratico days days to 1Explanation / Answer
Ratios
Average collection period = 365/Account Receivable Turnover Ratio*
*Account Receivable turnover Ratio=Net Credit sales/Average account receivables
365/8.86* = 41 days
*18612000/2100000**=8.86
**1080000+1560000/2=2100000
RatioAverage collection period = 365/Account Receivable Turnover Ratio*
*Account Receivable turnover Ratio=Net Credit sales/Average account receivables
365/8.86* = 41 days
*18612000/2100000**=8.86
**1080000+1560000/2=2100000
Average days in inventory=Inventroy/Cost of Sales*365 1960000/11696000= 61.17 days Current Ratio = Current Asset/Current Liablities 680000/1940000 = 0.35 times DEbt to Equity Ratio = Total Liablities/Total Equity 1940000+2380000/1920000+2840000 = 0.91Related Questions
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