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BA314 Tutorial 4

This document contains information about Tan Xiang Long including his ID number. It also contains sample accounting problems and solutions related to days sales outstanding, inventory turnover, receivables turnover, and financial ratios. The problems provide data on the balance sheets and income statements of sample companies to calculate ratios such as receivables turnover, inventory turnover, working capital, current ratio, acid-test ratio, and sales to working capital.

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陈祥龙
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63 views

BA314 Tutorial 4

This document contains information about Tan Xiang Long including his ID number. It also contains sample accounting problems and solutions related to days sales outstanding, inventory turnover, receivables turnover, and financial ratios. The problems provide data on the balance sheets and income statements of sample companies to calculate ratios such as receivables turnover, inventory turnover, working capital, current ratio, acid-test ratio, and sales to working capital.

Uploaded by

陈祥龙
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Name: Tan Xiang Long

ID: 1001954085

1.

For Year Ended For Year Ended


December 31, 2012 July 31, 2012

Net Sales $700,000 $690,000

Receivables, less allowance for doubtful accounts:

Beginning of period 45,000 80,000


(allowance, January 1, $2,000; August 1, $3,000)

End of period
(allowance, December 31, $3,000; 50,000 85,000
July 31, $3,500)

Required:
a. Compute the days' sales in receivables for July 31, 2012, and December 31, 2012, based
on the data above.
b. Compute the accounts receivable turnover for the period ended July 31, 2012, and
December 31, 2012.
c. Comment on the results from (a) and (b).

ANS:
a. Days' sales in receivables December 31, 2012 July 31, 2012

= 27.6 = 46.8

b.

December 31, 2012:

July 31, 2012:

c. Bill's Produce is a seasonal business. Therefore, the computation of days' sales in


receivables and accounts receivable turnover are distorted. These figures would be helpful
when comparing with prior years on the same date.
2. Hind Company presents the following data for 2012:

Accounts Receivable, less allowance for doubtful accounts of $40,000 $ 780,000


Ending Inventory, LIFO (estimated replacement cost $800,000) 500,000
Net Sales 4,750,000
Cost of Goods Sold (estimated replacement cost, $4,150,000) 3,550,000

Required:
a. Compute the days' sales in receivables.
b. Compute the days' sales in inventory, using the cost figure.
c. Compute the days' sales in inventory, using the replacement cost for the inventory and the
cost of goods sold.
d. Explain which days' sales in inventory figure is probably more realistic, the one computed
in (b) or (c).

ANS:
a.

b.

c.

d. The days' sales in inventory figure computed in (c) is probably more realistic because it
compares similar costs for both inventory and cost of goods sold.

3. Anne Elizabeth Company's Balance Sheet for December 31, 2012, and Income Statement For the Year
Ended December 31, 2012, are given below.

Balance Sheet
Anne Elizabeth Company
December 31, 2012

2012 2011
Assets:
Current Assets:
Cash $ 50,450 $ 28,538
Marketable Securities 25,000 20,500
Accounts Receivable, less allowance of $10,000 60,000 50,000
Inventory, LIFO 90,000 70,000
Prepaid 8,000 7,000
Total Current Assets 233,450 176,038

Property, Plant, and Equipment:


Land 9,000 8,000
Buildings and Equipment 220,000 210,000
229,000 218,000
Less Accumulated Depreciation (68,000) (60,000)
Total Assets $394,450 $334,038

Liabilities and Shareholders' Equity:


Current Liabilities:
Accounts Payable $ 35,000 $ 30,000
Accrued Compensation 8,000 7,000
Income Taxes 7,000 6,000
Total Current Liabilities 50,000 43,000

Long-Term Debt 40,000 11,038

Shareholders' Equity:
Common Shares 60,000 60,000
Retained Earnings 244,450 220,000
304,450 280,000
Total Liabilities and Shareholders' Equity $394,450 $334,038

Income Statement
Anne Elizabeth Company
For the Year Ended December 31, 2012

2012 2011 2010


Net sales $718,500 $650,500 $640,000
Cost of goods sold 580,000 520,000 515,000
Gross profit 138,500 130,500 125,000

Operating expenses:
Selling, general, and administrative $ 71,000 $ 67,000 $ 65,000
Interest 4,000 3,000 2,500
75,000 70,000 67,500
Earnings before income taxes 63,500 60,500 57,500
Income taxes 30,000 29,000 28,000
Net earnings $ 33,500 $ 31,500 $ 29,500

Required:
Compute the following ratios for 2012:
a. Accounts receivable turnover
b. Merchandise inventory turnover
c. Working capital
d. Current ratio
e. Acid-test ratio (conservative)
f. Sales to working capital
ANS:
a.

b.

c. Working capital = Current Assets - Current Liabilities


= $233,450 - $50,000 = $183,450

d. Current ratio = Current assets/Current liabilities

e.

f.

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