Question

Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.1x Days sales outstanding: 33 daysa Inventory turnover ratio: 3x Fixed assets turnover: 3x Current ratio: 1.6x Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 15% aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.

Balance Sheet:
Cash $ = ?
Current liabilities $ = ?
Accounts receivable = ?
Long-term debt = 48,750
Inventories = ?
Common stock = ?
Fixed assets = ?
Retained earnings= 81,250
Total assets= $325,000
Total liabilities and equity $ = ?
Sales $ = ?
Cost of goods sold $ = ?

Answer 1

Sol:

Given that Assets turnover ratio         = 1.1x, Total Assets = $325,000

                 Assets turnover ratio          = Net sales / Total assets

1.1       = Net sales / $325,000

                                  Net sales          = $325,000 * 1.1

                  Therefore Net sales         = $357,500

Given that Fixed Assets turnover ratio = 3x, Total Fixed Assets = $325,000

               Fixed Assets turnover ratio = Net sales / Total Fixed assets

                                                3          = $357,500 / Total Fixed assets

               Total Fixed assets                = $357,500 / 3

                Therefore Fixed assets     = $119,167

        Given that Gross Profit ratio       = 15% of sales

        Therefore Gross profit                = 15% * $357,500

                                                            = $53,625.00

We know that Cost of goods sold    = Sales – Gross profit

                                                            = $357,500 - $53,625

                  Cost of goods sold         = $303,875

Given that Days sales outstanding: 33 day sales

              Accounts receivables           = Sales / 365 * No of days sales outstanding

                                                            = $357,500 /365 * 33 days

Therefore Accounts receivables      = $32,322 (approx)

Given that Inventory turnover ratio = 3x, we know that Cost of goods sold = $303,875

            Inventory turnover ratio          = Cost of goods sold / Average inventory

                                                3          = $303,875 / Average inventory

                        Average inventory      = $303,875 / 3

                                                            = $101,292

                        Average inventory      = Opening Inventory + Closing Inventory / 2

Opening Inventory + Closing Inventory / 2     = $101,292

Therefore Closing inventory                        = $101,292 (Since no information is given regarding Opening inventory, we assume that both are equal)

Given that Current ratio = 1.6x

We know that current ratio     = Current assets / Current liabilities

                                    1.6       = Current assets / Current liabilities

            Current Liabilities        = Current assets / 1.6

Current Assets            = Inventory + Accounts receivables + cash and cash equivalents

Current liabilities          = Accruals + accounts payables + Notes payables

From Total assets we can extract the Cash balance      

Total assets = Fixed assets+ Accounts receivables+ cash+ Inventories

$325,000         = $119,167+$32,322+Cash+ $101,292

$325,000         = $252,781 +Cash

Cash               = $325,000 - $252,781

                        = $72,219

Current assets          = Inventory + Accounts receivables + cash and cash equivalents

                                    = $101,292 + $32,322 + $72,219

                                    = $205,833

Therefore Current Liabilities

                                    = Current Assets / 1.6

                                    = $205,833 / 1.6

                                    = $128,645

In Balance sheet we know that Total Liabilities and Equity = Total Assets = $325,000

Total Liabilities and Equity = Common stock + Retained earrings + Long term debt+ Current liabilities

$325,000         = Common stock + $81,250+ $48,750 + $128,645

$325,000         = Common Stock + $258,645

Common Stock         = $325,000 - $258,645

Therefore Common Stock = $66,355

In Summary

Cash $ = $72,219
Current liabilities $ = $128,645
Accounts receivable = $32,322
Long-term debt = 48,750
Inventories = $101,292
Common stock = $66,355
Fixed assets    = $119,167
Retained earnings = 81,250
Total assets = $325,000
Total liabilities and equity $ = $325,000
Sales $ = $357,500
Cost of goods sold $ = $303,875

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