Complete the balance sheet and sales information that follows using the followin

Question

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

Debt Ratio: 50%
Current ratio:1.8x
Total assets turnover:1.5x
Days sales outstanding: 36.5 days
Gross profit margin on sales: (Sales-Cost of goods sold)/Sales=25%
Inventory turnover ratio:5x

*Calculation is bases on a 365-day year.

Balance Sheet

Cash ____________ Acount payable _____________

Accounts receivable ________________ Long-term debt $60,000

Inventories _____________ Common Stock _______________

Fixed assets_____________ Retained earnings $97,500

Total Assets $300,000 Total liabilities and equity________

Sales ______________ Cost of goods sold __________

Explanation / Answer

From the given data, Long-term debt + Retained earnings = $157,500 We know Debt-ratio = Total liabilities / Total assets 0.50 = TL / $300,000 TL = $150,000 Current liabilities + Long-term liabilities = Total liabilities Current liabilities = $150,000 - $60,000 = $90,000 Therefore, accounts payable = $90,000 But Total assets = Total liabilities + Stockholder’s equity $300,000 = $150,000 + SE SE = $150,000 Therefore Retained earnings + common stock = $150,000 $97,500 + Common stock = $150,000 Common stock = $52,500 Given that current assets ratio is 1.8 But Current assets = Total current assets / Total current liabilities 1.8 = TCA / $90,000 TCA = $162,000 But Total assets = Total current assets + Total fixed assets $300,000 = $162,000 + TFA TFA = $138,000 Total assets turnover ratio is computed as Total asset turnover ratio = Sales / Total assets 1.5 = Sales / $300,000 Net sales = $450,000 Calculating Cost of goods sold: Gross profit margin ratio = (Sales – COGS)/ sales 0.25 = ($450,000 – COGS) / $450,000 COGS = $337,500 From the inventory turnover ratio, nventory turnover ratio = COGS / inventory 5 = $337,500/ Inventory Inventory = $67,500 To calculate the accounts receivables we are using the Days sales in receivables ratio Days sales in receivables = 365 Days / Receivables turnover 36.5days = 365days / RT RT = 10 But Receivables turnover = Sales / Accounts receivables 10 = $450,000 / Accounts receivables Accounts receivables = $45,000 Therefore, Cash = $49,500

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