The following selected account balances were taken from Buckeye Company\'s gener
ID: 2425266 • Letter: T
Question
The following selected account balances were taken from Buckeye Company's general ledger at January 1, 2019 and December 31, 2019:
January 1, 2019 December 31, 2019
Accounts receivable 42,000 34,000 Inventory 57,000 71,000
The following information was taken from Buckeye Company's 2019 income statement:
Sales revenue $693,500 Cost of goods sold 467,200 Salaries expense 135,900 Gain on sale of land 2,000 Net income $ 92,400
Calculate Buckeye Company's 2019 operating cycle. Enter your answer as a number (i.e., 94). Do not use decimals or a $ in your answer. Additionally, do not type the word days after your answer.
Explanation / Answer
operating cycle = 365/Purchases * Average inventory + 365 /Credit sales * Average receivables Cost of goods sold = opening inventory + Purchases - closing inventory Hence Purchases = Cost of goods sold - opening inventory + closing inventory = 467200 - 57000 + 71000 = 481200 Average inventory = ( opening inventory + closing inventory) /2 = ( 57000 + 71000)/2 = 64000 Average reeivables = ( opening receivable + closing receivables)/2 = ( 42000 + 34000) /2 '-= 38000 operating cycle = 365/ 481200 * 64000 + 365/693500 * 38000 = 49 + 20 = 69