A company has cash of $500,000, inventory of $1,000,000, and total assets of $3,

Question

A company has cash of $500,000, inventory of $1,000,000, and total assets of $3,650,000. Its collection period is 60 days and its asset turnover is 2x. Its accounts receivable balance would be _______________________________________. The following partial balance sheet may help you answer this question. Assume 365 days in a year. Cash $500,000 Accounts Receivables ? Inventory 1,000,000 Total Current Assets ? Fixed Assets ___ ?___ Total Asset $3,650,000

Cash                                        $500,000

Accounts Receivables                   ?

Inventory                               1,000,000

Total Current Assets                     ?

Fixed Assets                           ___ ?___

Total Asset                           $3,650,000

Explanation / Answer

Step1: Computation of total turnover of the company.We have,

Asset Turnover ratio = Total Sales Revenue / Total Assets

2 = Total Sales Revenue / 3,650,000

Hence, total sales Revenue is $ 3,650,000

Step2; Computation of Account receivable.We have,

Account Receivable = Total sales Revenue x Collection period/ years

Account Receivable = 3,650,000 x 60/365 = $ 600,000

Hence, Account receivable is $ 600,000

Step3: Computation of Total Current assets and Fixed Asset.We have,

Particulars Calculation Amount($) Cash 500,000 Account Receivables 600,000 Inventory 1,000,000 Total Current Assets (500,000 + 600,000+1,000,000) 2,100,000 Fixed Assets ( 3,650,000 - 2,100,000) 1,550,000 Total Assets 3,650,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.