Problem 4-22 Balance Sheet Analysis Complete the balance sheet and sales informa

Question

Problem 4-22
Balance Sheet Analysis

Complete the balance sheet and sales information using the following financial data:

Total assets turnover: 1.4x
Days sales outstanding: 42 daysa
Inventory turnover ratio: 7x
Fixed assets turnover: 3.5x
Current ratio: 2.3x
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 20%
aCalculation is based on a 365-day year. Round your answer to the nearest cent.

Balance Sheet Cash $   Current liabilities $   Accounts receivable $   Long-term debt 70,000 Inventories $   Common stock $   Fixed assets $   Retained earnings 87,500 Total assets $350,000 Total liabilities and equity $   Sales $   Cost of goods sold $  

Explanation / Answer

1. Asset Turnover Ratio = 1.4

Total Assets = $350,000

Sales = 350,000 x 1.4 = $490,000

2. Gross Profit = 490,000 x 20% = $98,000

3. Cost of Goods Sold = $490,000 - 98,000 = $392,000

4. Account Receivable = 490,000 / 365 x 42 = $56,384

5. Inventory = 392,000 / 7 = $56,000

6. Fixed Assets = 490,000 / 3.5= $140,000

7. Current Assets = 350,000 - 140,000 = $210,000

8. Current Liabilities = 210,000 / 2.3 = $91,304

9. Total Liabilities and Equity = $350,000

10. Common Stock= 350,000 - 91,304 - 70,000 - 87,500 = $101,196

Balance Sheet:

Liabilities Amount Assets Amount Current Liabilities 91,304 Cash 97,616 Long Term Debt 70,000 Account Receivables 56,384 Common Stock 101,196 Inventories 56,000 Retained Earning 87,500 Fixed Assets 140,000 Total 350,000 Total 350,000

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