In: Accounting
Crane Company has these comparative balance sheet
data:
CRANE COMPANY |
||||
---|---|---|---|---|
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 |
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