Assume ABC Corporation has Cash, A/R, and Inventory as its only Current Assets and PPE as...

Assume ABC Corporation has Cash, A/R, and Inventory as its only Current Assets and PPE as the only Long-Term Asset. Given the following information calculate the PPE for ABC Corporation.

Collection period = 40 days, Days sales in cash = 15 days, Current ratio = 2.4, inventory turnover = 3 times, liabilities to assets = 80%, payables period = 45 days, cash = $400,000, inventory = $800,000, total assets = $4,500,000.

Please show work so that I can learn how to interpret all of this information, thank you!

Expert Solution

Days Sales in Cash = 365 * Cash / Sales
15 = 365 * $400,000 / Sales
Sales = $9,733,333.33

Collection Period = 365 * Accounts Receivable / Sales
40 = 365 * Accounts Receivable / $9,733,333.33
Accounts Receivable = $1,066,666.67

Current Assets = Cash + Accounts Receivable + Inventory
Current Assets = $400,000 + $1,066,666.67 + $800,000
Current Assets = $2,266,666.67

Total Assets = Current Assets + Property, Plant and Equipment
$4,500,000 = $2,266,666.67 + Property, Plant and Equipment
Property, Plant and Equipment = $2,233,333.33

jeff jeffy answered 2 years ago

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