Question

Complete the balance sheet and sales information using the following financial data:

Total assets turnover: 1.4x
Days sales outstanding: 37.5 days^a
Inventory turnover ratio: 4x
Fixed assets turnover: 3x
Current ratio: 2.1x
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 25%
^aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.

Cash	$		Current liabilities	$
Accounts receivable			Long-term debt	30,000
Inventories			Common stock
Fixed assets			Retained earnings	60,000
Total assets	$200,000		Total liabilities and equity	$
Sales	$		Cost of goods sold	$

Answer 1

1). Total assets turnover = Sales/Total assets = 1.4

Sales = Total assets*1.4 = 200,000*1.4 = 280,000

2). Cost of goods sold (COGS): Gross margin = 1 - (COGS/Sales)

COGS = Sales*(1 - Gross margin) = 280,000*(1-25%) = 210,000

3). Fixed asset turnover = Sales/Fixed assets = 3

Fixed assets = Sales/3 = 280,000/3 = 93,333.33

4). Inventory turnover = COGS/inventory = 4

Inventory = COGS/4 = 210,000/4 = 52,500

5). Days sales outstanding (DSO) = account receivable/Average sales per day = 37.5 days

Account receivable = 37.5*average sales per day = 37.5*(Sales/365) = 37.5*280,000/365 = 28,767.12

6). Cash = Total assets - A/C receivable - inventories - fixed assets

= 200,000 - 28,767.12 - 52,500 - 93,333.33 = 25,399.54

7). Current assets = cash + account receivable + inventories = 25,399.54 + 28,767.12 + 52,500 = 106,666.67

Current ratio = current assets/current liabilities = 2.1

Current liabilities = current assets/2.1 = 106,666.67/2.1 = 50,793.65

8). Total liabilities and equity = Total assets = 200,000

Common stock = Total liabilities and equity - current liabilities - long-term debt - retained earnings

200,000 - 50,793.65 - 30,000 - 60,000 = 59,206.35