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ID: 2688818 • Letter: #
Question
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2010
2011
Cash and marketable securities
$ 50,000
$ 50,000
Accounts receivable
300,000
350,000
Inventories
350,000
500,000
Total current assets
$700,000
$900,000
Accounts payable
$200,000
$250,000
Bank loan
0
150,000
Accruals
150,000
$600,000
Total current liabilities
$350,000
$600,000
Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2010 and $1,200,000 in 2011.
a. Calculate the inventory turnover for each year. Comment on your findings.
b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?
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2010
2011
Cash and marketable securities
$ 50,000
$ 50,000
Accounts receivable
300,000
350,000
Inventories
350,000
500,000
Total current assets
$700,000
$900,000
Accounts payable
$200,000
$250,000
Bank loan
0
150,000
Accruals
150,000
$600,000
Total current liabilities
$350,000
$600,000
Explanation / Answer
a.inventory turnover for 2010=1000000/350000=2.85 inventory turnover for 2011=1200000/500000=2.4 b.inventories=1200000/2.85=421052.6
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