Excerpts from Candle Corporation\'s most recent balance sheet (in thousands of d

Question

Excerpts from Candle Corporation's most recent balance sheet (in thousands of dollars) appear below: Year 2 Year 1 Current assets: Cash Accounts receivable Inventory Prepaid expenses s 300 $160 370 380 250 180 81 71 Total current assets $ 991 $ 801 Current liabilities Accounts payable Accrued liabilities Notes payable, short term $ 300 300 210 81 71 Total current liabilities S 591 S 470 Sales on account during the year totaled $1,550 thousand Cost of goods sold was $945 thousand Required a. Compute the following working capital for Year 2.(Enter your answer in thousands of dollars, i.e., 100,000 should be entered as 100.) Compute the following current ratio for Year 2. (Round your answer to 2 decimal places.) b.

Explanation / Answer

Candle Corporation 1) Working Capital = Current Assets - Current Liabilities Working Capital = $991 - $591 $400 thousands 2) Current Ratio = CA / CL Current Ratio = $991/$591 1.68 times 3)Acid test ratio = (CA - Inventory - Prepaid exp.)/ CL Acid Test Ratio = ($991 - $250 - $71)/$591 1.13 times 4) Accounts Receivables turnover = Cr. Sales/ average A/R Accounts Receivables Turnover = $1550/((370+380)/2) 4.13 times 5) Average Collection Period = 365/A/R turnover Average Collection Period = 365/4.13 88.31 days 6) Inventory Turnover = COGS/ Average Inventory Inventory Turnover = $945/((250+ 180)/2) 4.40 times 7) Average Sale period = 365 / Inventory Turnover Average Sale Period = 365/4.40 83.04 days

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