Exam 3 Chapters 10-13+ Appendix D 5. The financial information below presents se
ID: 2596610 • Letter: E
Question
Exam 3 Chapters 10-13+ Appendix D 5. The financial information below presents selected information from the financial statements of Pelican Company. Sales revenue during the current year was $13,600,300 and cost of goods sold was $8,907,695 All of Pelican's sales are made on account and are due within 30 days Prior Year Current Year Cash and cash equivalents Accounts receivable Inventory Total current assets Total assets Total current liabilities Total liabilities 557,330 S 609,780 4,600,000 3,805,000 925,360 1,238,440 8,575,030 8,405,100 11,105,020 10,985,000 7.375,300 7,151,000 8,454,900 8,250,700 Calculate the following a. Current ratios as of the end of the current and prior year. (Round your answers to 2 decimal places.) Current Year Prior Year Current Ratio b. Calculate the receivables turnover ratio for the current year. (Round your answer to 2 decimal places.) c. Calculate the days to collect for the current year (Round your intermediate calculations and final answers to 2 decimal place.) Days to CollectExplanation / Answer
Answer a.
Current Year:
Current Ratio = Current Asset / Current Liabilities
Current Ratio = $8,405,100 / $7,151,000
Current Ratio = 1.18 : 1
Prior Year:
Current Ratio = Current Asset / Current Liabilities
Current Ratio = $8,575,030 / $7,375,300
Current Ratio = 1.16 : 1
Answer b.
Current Year:
Average Accounts Receivable = (Opening Accounts Receivable + Closing Accounts Receivable) / 2
Average Accounts Receivable = ($4,600,000 + $3,805,000) /2
Average Accounts Receivable = $4,202,500
Receivable turnover = Sales / Average Accounts Receivable
Receivable turnover = $13,600,300 / $4,202,500
Receivable Turnover = 3.24 times
Answer c.
Days to collect = 365 days / Accounts Receivable turnover
Days to collect = 365 / 3.24
Days to collect = 113 days
Answer d.
Average Inventory = (Opening Inventory + Closing Inventory) / 2
Average Inventory = ($925,360 + $1,238,440) / 2
Average Inventory = $1,081,900
Inventory Turnover Ratio = Cost of goods sold / Average Inventory
Inventory Turnover Ratio = $8,907,695 / $1,081,900
Inventory Turnover Ratio = 8.23 times
Answer e.
Days to Sell = 365 / Inventory Turnover Ratio
Days to Sell = 365 / 8.23
Days to Sell = 44.35 days
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