The following financial information has been provided by Star LLC: Balance Sheet
ID: 3216298 • Letter: T
Question
The following financial information has been provided by Star LLC:
Balance Sheet Data
As of December 31:
2017
2016
Accounts receivable
$671,000
$642,000
Allowance for doubtful accounts
31,000
22,000
Net accounts receivable
$640,000
$620,000
Inventories - LCM
$542,500
$642,500
Income Statement Data
Net credit sales
$3,150,000
$3,000,000
Net cash sales
800,000
600,000
Net sales
$3,950,000
$3,600,000
Cost of goods sold
$2,370,000
$2,160,000
Selling, general and adm. expenses
475,000
350,000
Other
150,000
125,000
Total operating expenses
$2,995,000
$2,635,000
Net income
$ 955,000
$ 965,000
Required:
What is the accounts receivable turnover for 2017?
What is the inventory turnover for 2017?
Balance Sheet Data
As of December 31:
2017
2016
Accounts receivable
$671,000
$642,000
Allowance for doubtful accounts
31,000
22,000
Net accounts receivable
$640,000
$620,000
Inventories - LCM
$542,500
$642,500
Income Statement Data
Net credit sales
$3,150,000
$3,000,000
Net cash sales
800,000
600,000
Net sales
$3,950,000
$3,600,000
Cost of goods sold
$2,370,000
$2,160,000
Selling, general and adm. expenses
475,000
350,000
Other
150,000
125,000
Total operating expenses
$2,995,000
$2,635,000
Net income
$ 955,000
$ 965,000
Explanation / Answer
Average accounts receivable
= (sum of beginning and ending accounts receivable over a time period )/ 2
= ($620,000 + $640,000) / 2
= $630,000
Accounts receivable turnover for 2017 = Net credit sales/ Average accounts receivable
= $3,150,000 / $630,000
= 5
inventory turnover for 2017 = Cost of goods sold / Inventory
= $2,370,000/ $542,500
= 4.37 turns/yr
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