Natcher Corporation’s accounts receivable at the end of Year 2 was $148,000 and its accounts receivable...

Natcher Corporation’s accounts receivable at the end of Year 2 was $148,000 and its accounts receivable at the end of Year 1 was $156,000. The company’s inventory at the end of Year 2 was $151,000 and its inventory at the end of Year 1 was $143,000. Sales, all on account, amounted to $1,404,000 in Year 2. Cost of goods sold amounted to $822,000 in Year 2. The company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations to 1 decimal place.)

Multiple Choice

48.9 days

104.9 days

74.4 days

70.8 days

Solutions

Expert Solution

104.9 days

Working:

# 1	Average accounts receivable	=	(148000+156000)/2	=	1,52,000
# 2	Average Inventory	=	(151000+143000)/2	=	1,47,000
# 3	Inventory turnover ratio	=	Cost of goods sold/Average Inventory	=	822000	/	1,47,000	=	5.6
# 4	Days Inventory outstanding	=	Days in a Year/Inventory Turnover ratio	=	365	/	5.6	=	65.2
# 5	Accounts Receivable Turnover ratio	=	Net credit sales/Average Accounts receivable	=	1404000	/	1,52,000	=	9.2
# 6	Days sales outstanding	=	Days in a Year/Accounts receivable Turnover ratio	=	365	/	9.2	=	39.7

# 7	Operating cycle for year 2	=	Days Inventory outstanding + Days sales outstanding	=	65.2	+	39.7	=	104.9

ekkarill92 answered 1 year ago

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