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Rags to Riches Selected data from the financial statements are provided below: 2

ID: 2548049 • Letter: R

Question

Rags to Riches
Selected data from the financial statements are provided below:

2020

2019

Accounts Receivable

$  120,000

$  76,000

Inventory

24,000

32,000

Total Assets

900,000

760,000

Net Sales

760,000

540,000

Cost of Goods Sold

320,000

420,000

Refer to Rags to Riches. Which of the following would be found through ratio analysis of the company’s financial statements?

a.

Total assets decreased 18.4% during 2020.

b.

Accounts receivable increased $22,000 during 2020.

c.

Cost of goods sold increased $50,000 or 23.8% in 2020.

d.

The accounts receivable turnover ratio is 7.76 in 2020.

2020

2019

Accounts Receivable

$  120,000

$  76,000

Inventory

24,000

32,000

Total Assets

900,000

760,000

Net Sales

760,000

540,000

Cost of Goods Sold

320,000

420,000

Explanation / Answer

Average AR=(120,000+76000)/2=$98000

accounts receivable turnover=Net sales/Average AR

=(760,000/98000)=7.76 (Approx)

Hence the correct option is D.

NOTE:Total assets increased for 2020;AR increased by $44000 and COGS decreased by $100,000.