Question

Granger Corporation had $184,000 in sales on account last year. The beginning accounts receivable balance was $14,000 and the ending accounts receivable balance was $23,000. The corporation's average collection period was closest to: (Round your intermediate calculations to 2 decimal places.) Garrison 16e Rechecks 2017-10-04

Multiple Choice

27.8 days

45.6 days

9.9 days

36.7 days

2. Data from Fontecchio Corporation's most recent balance sheet appear below: Cash $ 40,000 Marketable securities $ 42,000 Accounts receivable $ 113,840 Short-term notes receivable $ 0 Inventory $ 79,000 Prepaid expenses $ 35,000 Current liabilities $ 272,000 The corporation's acid-test ratio is closest to:

Multiple Choice

0.57

0.15

0.72

0.30

3. Jester Corporation's most recent income statement appears below: Income Statement Sales (all on account) $ 130,000 Cost of goods sold 60,000 Gross margin 70,000 Selling and administrative expense 28,000 Net operating income 42,000 Interest expense 10,000 Net income before taxes 32,000 Income taxes (30%) 9,600 Net income $ 22,400 The beginning balance of total assets was $140,000 and the ending balance was $137,400. The return on total assets is closest to:

Multiple Choice

16.1%

30.3%

23.1%

21.2%

4. Irawaddy Company, a retailer, had cost of goods sold of $245,000 last year. The beginning inventory balance was $25,000 and the ending inventory balance was $24,000. The company's average sale period was closest to:

Multiple Choice

2.68 days

36.50 days

0.03 days

10.00 days

Answer 1

1	Last year - Credit Sales			$184,000
	Accounts Receivable - Beginning			$14,000
	Accounts Receivable - Closing			$23,000
	Average Collection Period - 365/Receivable Turnover
	We are assuming 365 days
	Receivable Turnover = Credit Sales/Average accounts receivable
			184000/((14000+23000)/2)
			9.945946
	Average Collection period = 365/9.945946
	Average collection period = 36.70 days		36.70	days
2	Cash	$40,000		Current Liabilities	$272,000
	Marketable securities	$42,000
	Accounts Receivable	$113,840
	Short Term notes receivable	$0
	Inventory	$79,000
	Prepaid expenses	$35,000
	Current assets	$309,840
	Acid Test = Current assets - prepaid expenses - inventory/Current liabilities
	Acid test =(309840-35000-79000)/272000			0.72
	Acid Test = 0.72
3	Sales	$130,000
	Less : Cost of Goods Sold	($60,000)
	Gross Margin	$70,000
	less : Selling and administrative expense	($28,000)
	Net Operating Income	$42,000
	Less : Interest Expense	($10,000)
	Net income before taxes	$32,000
	Tax @ 30%	$9,600
	Net Income	$22,400
	Total Assets - Beginnning	$140,000
	Total Assets - Ending	$137,400
	Average assets	$138,700
	Return on total assets = 22400/138700		16.1%
	Return on total assets is 16.10%
4	COGS - Last year	$245,000
	Beginning inventory balance	$25,000
	Ending Inventory balance	$24,000
	Inventory Average	$24,500
	Inventory Turnover	245000/24500
		10
	365/Inventory turnover
	365/10	36.5	days
	Company's average sale period is 36.50 days