Bennis Company has the following comparative balance sheet data. December 31 200
ID: 2351228 • Letter: B
Question
Bennis Company has the following comparative balance sheet data.
December 31
200,500
180,100
$344,660
$319,560
54,590
47,210
$344,660
$319,560
Additional information for 2012:
Net income was $24,880.
Sales on account were $410,300. Sales returns and allowances were $20,600.
Cost of goods sold was $198,300.
The allowance for doubtful accounts was $2,200 on December 31, 2012, and $2,030 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.)
BENNIS COMPANY Balance SheetsDecember 31
2012 2011 Cash $ 14,740 $ 29,940 Receivables (net) 69,790 59,500 Inventories 59,630 50,020 Plant assets (net)200,500
180,100
$344,660
$319,560
Accounts payable $49,770 $52,150 Mortgage payable (15%) 100,300 100,300 Common stock, $10 par 140,000 119,900 Retained earnings54,590
47,210
$344,660
$319,560
Explanation / Answer
Current Ratio: Current Ratio = Current Assets / Current Liabilities Current Assets: Cash $14,740 Receivables (Net) $69,790 Inventories $59,630 Total Current assets $144,160 Current Liabilities: Accounts payable $49,770 Current Ratio = 144160 / 49770 = 2.9 : 1 Acid - test Ratio: Acid - test Ratio = (Cash + Receivables) / Current Liabilities = (14740 + 69790) / 49770 = 84530 / 49770 = 1.7 : 1 Receivables Turnover Ratio: Receivables Turnover Ratio = Net Credit Sales / Average Accounts Receivables Net credit sales = 410300 - 20600 = 389700 Average accounts receivable = (69790-2200 + 59500-2030)/2 = (67590+57470)/2 = 62530 Receivables Turnover Ratio = 389700 / 62530 = 6.2 times Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of Goods sold / Average Inventory Average Inventory = (59630 + 50020) / 2 = 54825 Inventory Turnover Ratio = 198300 / 54825 = 3.6 times Current Ratio: Current Ratio = Current Assets / Current Liabilities Current Assets: Cash $14,740 Receivables (Net) $69,790 Inventories $59,630 Total Current assets $144,160 Current Liabilities: Accounts payable $49,770 Current Ratio = 144160 / 49770 = 2.9 : 1 Acid - test Ratio: Acid - test Ratio = (Cash + Receivables) / Current Liabilities = (14740 + 69790) / 49770 = 84530 / 49770 = 1.7 : 1 Receivables Turnover Ratio: Receivables Turnover Ratio = Net Credit Sales / Average Accounts Receivables Net credit sales = 410300 - 20600 = 389700 Average accounts receivable = (69790-2200 + 59500-2030)/2 = (67590+57470)/2 = 62530 Receivables Turnover Ratio = 389700 / 62530 = 6.2 times Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of Goods sold / Average Inventory Average Inventory = (59630 + 50020) / 2 = 54825 Inventory Turnover Ratio = 198300 / 54825 = 3.6 timesThank you..... Current Ratio: Current Ratio = Current Assets / Current Liabilities Current Assets: Cash $14,740 Receivables (Net) $69,790 Inventories $59,630 Total Current assets $144,160 Current Liabilities: Accounts payable $49,770 Current Ratio = 144160 / 49770 = 2.9 : 1 Acid - test Ratio: Acid - test Ratio = (Cash + Receivables) / Current Liabilities = (14740 + 69790) / 49770 = 84530 / 49770 = 1.7 : 1 Receivables Turnover Ratio: Receivables Turnover Ratio = Net Credit Sales / Average Accounts Receivables Net credit sales = 410300 - 20600 = 389700 Average accounts receivable = (69790-2200 + 59500-2030)/2 = (67590+57470)/2 = 62530 Receivables Turnover Ratio = 389700 / 62530 = 6.2 times Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of Goods sold / Average Inventory Average Inventory = (59630 + 50020) / 2 = 54825 Inventory Turnover Ratio = 198300 / 54825 = 3.6 times
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