E 14.11 Selected financial data for SellFast, Inc, a retail store, appear as fol
ID: 2600197 • Letter: E
Question
E 14.11 Selected financial data for SellFast, Inc, a retail store, appear as follows Ratios for a Retail Store 2011 2010 Sales (all on account) Cost of goods sold Average inventory during the year Average receivables during the year .. . $750,000 $610,000 495,000 408,000 110,000 102,000 150,000 100,000 . Compute the following for both years: 1. a. 2. 3. Comment on favorable and unfavorable trends. Gross profit percentage Inventory turnover Accounts receivable turnover b. EXERCISE 14.12 A condensed balance sheet for Bradford Corporation prepared at the end of the year appears as Computing Ratios follows: Assets Liabilities & Stockholders' Equity Accounts receivable . . . . 10,000 360,000 300,000 430,000 $1,240,000 Long-term liabilities... Capital stock, $5 par. 60,000 . . . Plant & equipment (net)570,000 90,000 Retained earnings.... $1,240,000 Total . . During the year the company earned a gross profit of $1,116.000 on sales of $2,950,000 Accounts receivable, inventory, and plant assets remained almost constant in amount throughoutExplanation / Answer
Solution 14.11 :
a) 1.
= $750000 - $495000
= $255000
= $610000 - $408000
= $202000
= ($255000 / $750000) * 100
= 34%
= ($202000 / $610000) * 100
= 33.11%
2.
= $495000/ $110000
= 4.5 times
= $408000/ $102000
= 4 times
3. As all sales are on account, therefore net credit sales is equal to total sales.
= $750000 / $150000
= 5 times
= $610000 / $100000
= 6.1 times
b) Gross Profit Ratio has increased from 2010. It is indicator of good performance.
Inventory Turnover Ratio has also increased. It is indicator of good performance.
Accounts Receivable Turnover Ratio has decreased. It is indicator of unfavourable performance.
Particulars 2011 2010 Gross Profit = Sales - Cost of Goods Sold= $750000 - $495000
= $255000
= $610000 - $408000
= $202000
Gross Profit Percentage = (Gross Profit/Sales) * 100= ($255000 / $750000) * 100
= 34%
= ($202000 / $610000) * 100
= 33.11%
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