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hapter 12 Homework- Problem 12-6A Use Rati, × c I ezio.mheducation.com/hm.tpx Th

ID: 2542133 • Letter: H

Question

hapter 12 Homework- Problem 12-6A Use Rati, × c I ezio.mheducation.com/hm.tpx The following income statement and balance sheets for Virtual Gaming Systems are provided AL GAMING SYSTEMS Income Statement For the year ended December 31, 2018 Net sales Cost of goods sold $3,086,000 1,960,000 Gross profit 1126,000 Expenses: Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense $868,000 32,000 9,000 20,000 58,000 Total expenses 987,000 Net income $139,000 VIRTLIAL GAMING SYSTEMS

Explanation / Answer

Solution:

Calculation of Ratios

Numerator

/

Denominator

=

Ratio

1)

Receivable Turnover Ratio

Net Credit Sales

/

Average Accounts Receivable, net

=

Receivable Turnover Ratio

Accounts Receivable Turnover

$3,086,000

/

$80,500

[(91000 + 70,000)/2]

=

38.3

times

2)

Average Collection Period

Number of days in a year

/

Receivable Turnover Ratio

=

Average Collectoin Period

in days

Average Collection Period

365

/

38.3

=

9.5

days

3)

Inventory Turnover

Cost of Goods Sold

/

Average Inventory

=

Inventory Turnover

times

Inventory Turnover

$1,960,000

/

$130,000

[(115,000 + 145,000)/2]

=

15.1

times

4)

Average Days in Inventory

Number of Days in a year

/

Inventory Turnover Ratio

=

Average Days in Inventory

in days

Average Days in Inventory

365

/

15.1

=

24.2

days

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Numerator

/

Denominator

=

Ratio

1)

Receivable Turnover Ratio

Net Credit Sales

/

Average Accounts Receivable, net

=

Receivable Turnover Ratio

Accounts Receivable Turnover

$3,086,000

/

$80,500

[(91000 + 70,000)/2]

=

38.3

times

2)

Average Collection Period

Number of days in a year

/

Receivable Turnover Ratio

=

Average Collectoin Period

in days

Average Collection Period

365

/

38.3

=

9.5

days

3)

Inventory Turnover

Cost of Goods Sold

/

Average Inventory

=

Inventory Turnover

times

Inventory Turnover

$1,960,000

/

$130,000

[(115,000 + 145,000)/2]

=

15.1

times

4)

Average Days in Inventory

Number of Days in a year

/

Inventory Turnover Ratio

=

Average Days in Inventory

in days

Average Days in Inventory

365

/

15.1

=

24.2

days