Bennis Company has the following comparative balance sheet data. BENNIS COMPANY

Question

Bennis Company has the following comparative balance sheet data.
BENNIS COMPANY
Balance Sheets
December 31

2012 2011
Cash $ 15,450 $ 30,120
Receivables (net) 70,030 59,690
Inventories 59,800 49,980
Plant assets (net) 199,700
179,600

$344,980
$319,390


Accounts payable $50,070 $52,200
Mortgage payable (15%) 100,500 100,500
Common stock, $10 par 140,500 120,100
Retained earnings 53,910
46,590

$344,980
$319,390



Additional information for 2012:

Net income was $25,150.

Sales on account were $410,700. Sales returns and allowances were $19,700.

Cost of goods sold was $197,300.

The allowance for doubtful accounts was $3,000 on December 31, 2012, and $2,400 on December 31, 2011.

Compute the following ratios at December 31, 2012. (a) Current. (b) Acid-test. (c) Receivables turnover. (d) Inventory turnover. (Round answers to 1 decimal place, e.g. 10.5.)

(a) Current ratio : 1
(b) Acid-test ratio : 1
(c) Receivables turnover times
(d) Inventory turnover times

Explanation / Answer

current assets = cash + AR + Inventories = 15k + 70K + 60k = 145,000 current liability = 50,000 current ratio = current assets / current liabilty = 145/50 = 2.9 cash + AR = 15k + 70k = 85,000 acid test ratio = 85,000/50,000 =1.7 Average AR = (70k + 60K) / 2 = 65,000 net credit sales = 410k - 20k = 390,000 AR turnover = 390,000 / 65,000 = 6 times average = (50k + 60K) / 2 = 55,000 inventory turnover = COGS / avg inventory = 198,000 / 55,000 = 3.6

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