P 6-11 A partial balance sheet and income statement for King Corporation follow:
ID: 2383988 • Letter: P
Question
P 6-11 A partial balance sheet and income statement for King Corporation follow:
KING CORPORATION
Partial Balance Sheet
Assets December 31, 2011
Current assets:
Cash $ 33,493
Marketable securities 215,147
Trade receivables, less allowance of $6,000 255,000
Inventories, LIFO 523,000
Prepaid expenses 26,180
Total current assets $1,052,820
Liabilities
Current liabilities:
Trade accounts payable $ 103,689
Notes payable (primarily to banks) and commercial paper 210,381
Accrued expenses and other liabilities 120,602
Income taxes payable 3,120
Current maturities of long-term debt 22,050
Total current liabilities $ 459,842
KING CORPORATION
Partial Income Statement
For Year Ended December 31, 2011
Net sales $3,050,600
Miscellaneous income 45,060
$3,095,660
Costs and expenses:
Cost of sales $2,185,100
Selling, general, and administrative expenses 350,265
Interest expense 45,600
Income taxes 300,000
2,880,965
Net income $ 214,695
Note: The trade receivables at December 31, 2010, were $280,000, net of an allowance of
$8,000, for a gross receivables figure of $288,000. The inventory at December 31, 2010, was
$565,000.
(continued
a. Working capital
b. Current ratio
c. Acid-test ratio
d. Cash ratio
e. Days’ sales in receivables
f. Accounts receivable turnover in days
g. Days’ sales in inventory
h. Inventory turnover in days
i. Operating cycle
Explanation / Answer
For Year Ended December 31, 2007
Net sales $3,050,600
Miscellaneous income 45,060
$3,095,660
Costs and expenses:
Cost of sales $2,185,100
Selling, general, and administrative expenses 350,265
Interest expense 45,600
Income taxes 300,000
2,880,965
Net income $ 214,695
Working capital=$592978
Current ratio=2.28
Acid-test ratio=1.09
Cash ratio=0.54
Daysof sales in receivables=30.51
Accounts receivable turnover =11.96
Days of sales in inventory=87.36
Inventory turnover=4.17
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