Question

The following information is from Andy's Pharmaceutical Inc.’s financial statements:

Sales (all credit)	$245,000
Total assets turnover	0.80 times
Total debt to total assets	30.83%
Fixed asset turnover	1.1 times
Current ratio	4.04 times
Average collection period	29.68 days
Inventory turnover	7.42 times

Part A

Using the above listed ratios and data, compute the balance of the following accounts. Assume all sales are on credit and a 360-day year. Round to the nearest dollar. [Hint: use ratio formulas to derive the requested values. The book presents 13 ratio formulas on pages 60 - 64]. Please show your work.

A) Current assets

B) Average daily credit sales

C) Accounts Receivable

D) Inventory

E) Current liabilities

Answer 1

Answer:

Total Assets Turnover = Sales / Total Assets
0.80 = $245,000 / Total Assets
Total Assets = $306,250

Total Debt to Total Assets = Total Debt /Total Assets * 100
30.83 = Total Debt / $306,250 * 100
Total Debt = $94,417

Fixed Assets Turnover = Sales / Fixed Assets
1.1 = $245,000 / Fixed Assets
Fixed Assets = $222,727

Total Assets = Current Assets + Fixed Assets
$306,250 = Current Assets + $222,727
Current Assets = $83,523

Current Ratio = Current Assets / Current Liabilities
4.04 = $83,523 / Current Liabilities
Current Liabilities = $20,674

Inventory Turnover = Sales / Inventory
7.42 = $245,000 / Inventory
Inventory = $33,019

Average daily credit Sales = Credit Sales / No. of days in a year
Average daily credit Sales = $245,000 / 360
Average daily credit Sales = $680.56

Accounts Receivable = Average daily credit Sales * Average Collection Period
Accounts Receivable = $680.56 * 29.68
Accounts Receivable = $20,199