Assume that the year-end balances shown for accounts receivable and for inventor
ID: 2355757 • Letter: A
Question
Assume that the year-end balances shown for accounts receivable and for inventory approximate the average balances of these items throughout the year.
For each of the two companies, compute the working capital.(Omit the "$" sign in your response.)
For each of the two companies, compute the current ratio.(Round your answers to 1 decimal place.)
For each of the two companies, compute the quick ratio.(Round your answers to 1 decimal place.)
For each of the two companies, compute the number of times inventory turned over during the year and the average number of days required to turn over inventory.(Round your answersupto the nearest whole number. Use 365 days a year.)
For each of the two companies, compute the number of times accounts receivable turned over during the year and the average number of days required to collect accounts receivable.(Round your answersupto the nearest whole number. Use 365 days a year.)
For each of the two companies, compute the operating cycle.(Answers obtained in questions 4 and 5 should be used to answer question 6. Round your answersupto the nearest whole number.)
Shown below are selected financial data for Another World and Imports, Inc., at the end of the current year:Explanation / Answer
1. working capital = CA-CL CA of Another world= 51000+75000+84000= 210000 CL= 105000 Working capital= $105000 CA of import inc= 20000+70000+160000= 250000 CL= 100000 Working capital= $150000 2. current ratio= CA/CL Another world= 210000/105000=2 or 2:1 import inc= 250000/100000= 2.5 or 5:2 3.Quick ratio= (CA-inventories)/CL Another world= (210000-84000)/105000= 1.2 or 6:5 import inc= (250000-160000)/100000= .9 or 9:10 4.Number of times inventory turned over during the year= Cost of Goods Sold ÷Average Inventory Another world Number of times inventory turned over during the year=504,000/84000= 6 times Average number of days required to turn over inventory= 365/6= 60.83 or 61 days import inc Number of times inventory turned over during the year= 480,000/160000= 3 times Average number of days required to turn over inventory= 365/3= 121.67 or 122 days 5. Number of times accounts receivable turned over= Net credit sales/average accounts receivables Another world Number of times accounts receivable turned over= 675,000/75000= 9 times Average number of days required to collect accounts receivable= 365/9=40.55 or 41 days import inc Number of times accounts receivable turned over= 560,000/70000= 8 times Average number of days required to collect accounts receivable= 365/8=45.63 or 46 days