Lendell Company has these comparative balance sheet data: Lendell Company Balance Sheets December 31 2020 2019 Cash $ 16,000 $ 29,000 Accounts receivable (net) 71,000 59,000 Inventory 59,000 49,000 Plant assets (net) 205,000 182,000 $351,000 $319,000 Accounts payable $50,000 $59,300 Mortgage payable (15%) 106,500 106,500 Common stock, $10 par 141,500 124,500 Retained earnings 53,000 28,700 $351,000 $319,000 Additional information for 2020: 1. Net income was $24,000. 2. Sales on account were $404,100. Sales returns and allowances amounted to $20,600. 3. Cost of goods sold was $199,800. 4. Net cash provided by operating activities was $45,100. 5. Capital expenditures were $24,800, and cash dividends were $9,600. Compute the following ratios at December 31, 2020
a. Current ratio.
b. Accounts receivable turnover.
c. Average collection period.
d. Inventory turnover.
e. Days in inventory.

Question

contestada

Respuesta :

abdulmajeedabiodunac abdulmajeedabiodunac · Answer 1 · 2020-02-10T11:13:10+01:00

Answer:

The ratios are as follows:

Current ratio = 2.9 : 1

Accounts Receivable turnover = 1.8 : 1

Average Collection period = 203

Inventory turnover ratio = 0.9 : 1

Days in Inventory =400

Find detailed computations in the attached spreadsheet.

Explanation:

These are the formulas used in computing the ratios:

Current ratio= Current Asset/ Current Liablilties

Accounts Receivable turnover = Net Sales/ Average Receivable

Average Collection period = Number of working days/ Accounts Receivable Turnover

Inventory turnover ratio = Cost of goods sold/Average Inventory

Days in Inventory = Number of working days/ Inventory Turnover ratio