Jany Corporation has issued common stock only. The company has been successful a

Question

Jany Corporation has issued common stock only. The company has been successful and
has a gross profit rate of 20%. The information shown below was taken from the company’s
financial statements.
Beginning
inventory
P482,000
Purchases
4,416,000
Ending
inventory
?
Average accounts
receivable
700,000
Average common stockholder's equity
3,500,000
Sales (all on
credit)
5,200,000
Net income
420,000
Instructions: Compute the following:
1. Receivables turnover
2. Average number of days required to collect the accounts receivable
3. Inventory turnover
4. Average days in inventory

Explanation / Answer

1) Receivable turnover = 5200000/700000 = 7.43 Times

2) Average number of days required to collect the accounts receivable = 365/7.43 = 49.13 Days

3) Inventory turnover :

Ending inventory = 482000+4416000-(5200000*80%) = 738000

Average inventory = (482000+738000/2) = 610000

Inventory turnover = 4160000/610000 = 6.82 Times

4) Average days in inventory = 365/6.82 = 53.52 Days

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