gagement Exerc eBook Video Calculator Analysis of Activity Measures Based on the
ID: 2529730 • Letter: G
Question
gagement Exerc eBook Video Calculator Analysis of Activity Measures Based on the comparative income statement and balance sheet of Cowan Kitchen Counters, Inc., that follow: owan Kitchen Counters, I Comparative Income Statenent For Yaars Ended December 31, 20-2 and 20-1 20-2 20-1 Net Sales (all on account) Cost of goods sold Gross profit Operating expenses Other expense (interest) Income tax expense Net income $2,597,300 1,863,100 $734,200 313,000 24,200 173,400 $223,600 $2,166,900 1,626,800 $540,100 210,200 24,200 109,400 $196,300 Cowan Kitchen Counters, Inc. Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 $257,000 $242,200 Cash Government notes Accounts receivable (net) 248,600 907,400 248,600 797,900Explanation / Answer
a) Account receivable turnover = Credit sales / Average account receivable
Average account receivable = (907400+797900)/2 = 852650
Account receivable turnover = 2597300 / 852650 = 3.046
= 365 / 3.046 = 119.83 days approx.
(If isn't work try to calculate ration on the basis of opening account receivable only).
b).Merchandise inventory turnover = Cost of goods sold / Average Inventory
Average Inventory = (978000 + 908800)/2 = 943400
Inventory Turnover = 1863100 / 943400 = 1.974
= 365 days / 1.974 = 184.90 days approx.
(Further Inventory turnover is also calculated on the basis of sales instead COGS).
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