StarrKnight Corporation\'s Balance Sheet and Income Statement are shown below: B
ID: 2749476 • Letter: S
Question
StarrKnight Corporation's Balance Sheet and Income Statement are shown below:
BALANCE SHEET
(in thousands of dollars)
ASSETS 2008 2007
Current Assets
Cash $21,113 $19,930
Receivables 7,336 3,275
Inventories 25,135 24,270
Total $53,584 $47,475
Fixed Assets 25,767 19,720
Total Assets $79,351 $67,195
LIABILITIES
Current Liabilities 2008 2007
Acount Payable $9,493 $7,273
Notes Payable 429 416
Other 3990 3180
Total $13,912 $10,869
Long-term Liabilities 7,796 6,088
Stockholder's Equity 57,643 50, 238
Total Liability and Equity $79,351 $67,195
INCOME STATEMENT
(In thousands of dollars)
2008 2007
Net Sales $113,260 $96,695
Cost of Goods Sold 75,586 65,039
Other Operating Expenses 30,998 26,208
Operating Profit $6,676 $5,448
Other Income 7,061 6,280
Interest 658 520
Tax 3,924 3,362
Net Profit $9,155 $7,846
Dividends $460 $441
Retained Earnings $8,695 $7,405
(all sales and purchases are credit)
1. The inventory turnover ratio for 2008 for StarrKnight Corporation is (use average inventory): A. 2.96 B. 3.06 C. 3.17 D. 5.87 E. 6.05
2. The inventory period for 2008 for StarrKnight Corporation is (use average inventory): A. 60.73 days B. 62.18 days C. 115.14 days D. 119.28 days E. 123.31 days
3. StarrKnight Corporation's accounts receivable turnover ratio for 2008 is (use average accounts receivable): A. 2.88 B. 15.43 C. 21.35 D. 29.53 E. 34.58
4. StarrKnight Corporation's days in receivable for 2008 is (use average accounts receivable): A. 10.56 days B. 12.36 days C. 23.66 days D. 17.10 days E. 126.74 days
5. StarrKnight Corporation's accounts payable deferred period for 2008 is (use average payables): A. 7.75 B. 7.96 C. 8.94 D. 9.02 E. 10.39
Explanation / Answer
Answer to part 1:
Given data of 2008,
Cost of goods sold = $75586
Beginning Inventory = $24270
Ending Inventory = $25135
Average Inventory = (Beginning Inventory +Ending Inventory) / 2
= (24270 + 25135) / 2
= 49405 / 2
= $24702.50
Calculation of Inventory Turnover Ratio for 2008:
Inventory Turnover ratio = Cost of goods sold / Average Inventory
= 75586 / 24702.50
= 3.0598
= 3.06 (Approx.)
Correct Option is B) 3.06
Answer to Part 2:
Inventory Turnover Ratio = 3.06
Number of days in a year = 365
Calculation of Inventory period for 2008:
Inventory period = 365 / Inventory Turnover Ratio
= 365 / 3.06
= 119.28 days
Correct option is D) 119.28 days
Answer to Part 3:
Given data for 2008,
Net Sales = $113260
Beginning Receivables = $3275
Ending Receivables = $7336
Average Receivables = (Beginning Receivables + Ending Receivables) / 2
= (3275 + 7336) / 2
= 10611 / 2
= $5305.50
Calculation of Accounts Receivable Turnover Ratio for 2008:
Accounts Receivable Turnover Ratio = Net annual Credit Sales / Average Receivables
= 113260 / 5305.50
= 21.3476
= 21.35 (approx.)
Correct Option is C) 21.35
Answer to Part 4:
Accounts Receivable Turnover Ratio = 21.35
Number of days in a year = 365
Calculation of days in receivables for 2008:
Days in Receivables = Average Receivable Collection period
= Number of days in a year / Accounts Receivable Turnover Ratio
= 365 / 21.35
= 17.096 days
Correct option is D) 17.10 days
Answer to part 5:
Given data for 2008,
Cost of goods payable = $75586
Beginning Accounts payable = $7273
Ending Accounts Payable = $9493
Average Accounts Payable = (Beginning Accounts Payable + Ending Accounts Payable) / 2
= (7273 + 9493) / 2
= 16766 / 2
= $8383
Number of days in a year = 365
Calculation of Accounts payable deferred period for 2008:
Average payable deferred period = 365 * Average Accounts Payable / Cost of goods sold
= 365 * 8383 / 75586
= 40.4809
= 40.48 days
It was not found in options.
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