Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company\'s common s

Question

Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company's common stock sold for $2.50 per share at the end of this year. The company paid a common stock dividend of $0.40 per share this year. It also provided the following data excerpts from this year's financial statements: Ending Beginning Balance $31,500 47800 $ 56,000 46,300 $50,800 56,000 $138,300 150,100 $ 417000 405,300 $ 57,000 39,000 $117000 105,300 $ 114,000 114,000 $300,000 300,000 $ 417,000 405,300 Balance Cash Accounts receivable Current assets Total assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Gross margin Net operating income Interest expense Net income This Year $ 650,000 $ 377,000 $ 273,000 $120,750 $7000 $ 96,900

Explanation / Answer

Answer 9.

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($46,300 + $56,000) / 2
Average Accounts Receivable = $51,150

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $650,000 / $51,150
Accounts Receivable Turnover = 12.71 times

Average Collection Period = 365 / Accounts Receivable Turnover
Average Collection Period = 365 / 12.71
Average Collection Period = 28.72 days

Answer 10.

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($56,000 + $50,800) / 2
Average Inventory = $53,400

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $377,000 / $53,400
Inventory Turnover = 7.06 times

Average Sale Period = 365 / Inventory Turnover
Average Sale Period = 365 / 7.06
Average Sale Period = 51.70 days

Answer 11.

Operating Cycle = Average Collection Period + Average Sale Period
Operating Cycle = 28.72 days + 51.70 days
Operating Cycle = 80.42 days

Answer 12.

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($405,300 + $417,000) / 2
Average Total Assets = $411,150

Total Asset Turnover = Sales / Average Total Assets
Total Asset Turnover = $650,000 / $411,150
Total Asset Turnover = 1.58

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