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Crane Company has these comparative balance sheet data: CRANE COMPANY Balance Sheets December 31 2022 2021...

Crane Company has these comparative balance sheet data:

CRANE COMPANY
Balance Sheets
December 31

2022

2021

Cash

$ 27,105

$ 54,210

Accounts receivable (net)

126,490

108,420

Inventory

108,420

90,350

Plant assets (net)

361,400

325,260

$623,415

$578,240

Accounts payable

$ 90,350

$ 108,420

Mortgage payable (15%)

180,700

180,700

Common stock, $10 par

252,980

216,840

Retained earnings

99,385

72,280

$623,415

$578,240


Additional information for 2022:

1. Net income was $27,900.
2. Sales on account were $382,300. Sales returns and allowances amounted to $29,000.
3. Cost of goods sold was $207,500.
4. Net cash provided by operating activities was $57,000.
5. Capital expenditures were $28,900, and cash dividends were $17,900.


Compute the following ratios at December 31, 2022. (Round current ratio and inventory turnover to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8. Use 365 days for calculation.)

(a) Current ratio.

enter current ratio rounded to 2 decimal places

 :1
(b) Accounts receivable turnover.

enter accounts receivable turnover in times rounded to 1 decimal place

 times
(c) Average collection period.

enter average collection period in days rounded to 1 decimal place

 days
(d) Inventory turnover.

enter inventory turnover in times rounded to 2 decimal places

 times
(e) Days in inventory.

enter days in inventory rounded to 1 decimal place

 days
(f) Free cash flow.

$enter free cash flow in dollars rounded to 1 decimal place

Solutions

Expert Solution

Answer to (a) Computation of Current Ratio for 31st December , 2022

Current Ratio = Current Assets / Current Liabilities

Here, Current Assets = Cash + Accounts Receivable (net) + Inventory

= 27,105 + 1,26,490 + 108,420

= $262,015

and Current Liabilities = Accounts Payable = $90,350

Mortgage payable is seemed to be long term because the balance is same balance as 2021 and no change so , mortgage payable is a long term laibility and the interest payable on mortage is also not accrued , its paid.Mortgage payable balance remains same as 2021. So interest payable on mortgage is not current liability.

Then, Current Ratio = 262015/90350 = 2.9 =2.9:1

Answer to (b) Computation of Accounts Receivable Turnover

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

= (382,300 - 29000) / (126490+108420)/2

= 353300/117455

=3.0 = 3 times

Answer to (c) Computation of Average Collection Period

Average Collection Period = 365 / Accounts Receivable Turnover = 365/ 3 = 121.7 days

Answer to (d) Computation of inventory turnover

Inventory Turnover = Cost of goods sold / Average Inventory = 207500 / (108420+ 90350)/2

= 207500/ 99385

=2.09 ( 2 places of decimal)

= 2.09 times

ekkarill92 answered 1 year ago
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