tions Problem 4.22 Click here to read the eBook: Ratio Analysis Click here to re
ID: 2810915 • Letter: T
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tions Problem 4.22 Click here to read the eBook: Ratio Analysis Click here to read the eBook: Liquidity Ratios Click here to read the eBook: Asset Management Ratios Click here to read the eBook: Profitability Ratios Problem Walk-Through BALANCE SHEET ANALYSIS Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.3x Days sales outstanding: 38 days Inventory turnover ratio: 7x Fixed assets turnover: 3x Current ratio: 2.5x Gross profit margin on sales: (Sales-Cost of goods sold)/Sales = 35% aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. Balance Sheet Cash Current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity Cost of goods sold Accounts receivable 55,000 Inventories 82,500 Fixed assets Total assets $275,000 Sales 0-Icon Key Problem 4.22Explanation / Answer
Sales = Total Assets Turnover x Total Assets
= 1.3 x $275,000 = $357,500
COGS = Sales - [Gross Profit Margin x Sales]
= $357,500 - [ 0.35 x $357,500] = $357,500 - $125,125 = $232,375
Total Liabilities & Equity = Total Assets = $275,000
Fixed Assets = Sales/Fixed Assets Turnover
= $357,500/3 = $119,166.67
Inventory = Sales/Inventory Turnover Ratio
= $357,500/7 = $51,071.43
Accounts Receivable = (DSO x annual sales) / 365
= (38 x $357,500) / 365 = $37,219.18
Cash = Total Assets - Fixed Assets - Inventories - Accounts Receivable
= $275,000 - $119,166.67 - $51,071.43 - $37,219.18 = $67,542.73
Current Liabilities = Current Assets/Current Ratio
= [$51,071.43 + $37,219.18 + $67,542.73] / 2.5 = $155,833.33 / 2.5 = $62,333.33
Common Stock = Total Liabilities & Equity - Retained Earnings - Long-Term Debt - Current Liabilities
= $275,000 - $82,500 - $55,000 - $62,333.33 = $75,166.67
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