Question

In: Finance

1.) Given the following: Current Assets $ 18,000 Accounts Receivable $ 3,000 Current Liabilities $ 16,000...

1.) Given the following:

Current Assets	$	18,000
Accounts Receivable	$	3,000
Current Liabilities	$	16,000
Inventory	$	2,000
Net Sales	$	41,000
Total Assets	$	29,000
Net Income	$	6,000

Find the following (round to the nearest hundredth if needed):

A.	Current ratio	?
B.	Acid test	?
C.	Average day's collection	?	days
D.	Asset Turnover	?
E.	Profit margin on sales	?

2.) Complete using trend analyses for sales. Round to nearest percent and use 2014 as the base year.

	2017		2016		2015		2014
Sales	$ 158,000		$ 615,000		$ 280,000		$ 500,000
		%		%		%		%

3.) From the following information, could you help Bill calculate his cost of merchandise sold?

Beginning inventory	$	2,500
Purchases	$	3,000
Purchase returns	$	400
Purchase discounts	$	100
Ending inventory	$	2,100

Cost of Merchandise Sold

???

4.) Al Flynn has gathered the following information. Could you help Al calculate his gross profit?

Gross sales	$ 25,000
Sales discounts	$ 3,000
Beg inventory	$ 2,000
Net purchases	$ 4,000
Ending inventory	$ 2,800
Operating expense	$ 1,800

Gross Profit

????

Expert Solution

1) Ratios

a) Current Ratio = Current Assets/Current Liabilities
= 18000/16000
Current Ratio = 1.125

b) Acid Test Ratio = (Current Assets - Inventory) / Current Liabilities
= (18000 - 2000)/16000
= 16000/16000
Acid Test Ratio = 1.00

c) Average Day's Collection = Accounts Receivables/ Net Sales * 365
= 3000/41000 * 365
Average Day's Collection = 26.707 days ~ 27 days

d) Asset Turnover = Net Sales / Total Assets
= 41000/29000
Asset Turnover = 1.4138 ~ 1.41

e) Profit Margin on Sales = Net Income / Total Sales
= 6000/41000
Profit Margin on Sales = 0.146341 or 14.63%

2) Trend Analysis = (Net Sales in next year / Net Sales in current year) - 1

Year	2014	2015	2016	2017
Net Sales	500,000	280,000	615,000	158,000
Trend Analysis		-44.00%	119.64%	-74.31%

3) Net Purchase = Purchase - Purchase Returns - Purchase discount
= 3000 - 400 - 100
Net Purchase = 2500

Cost of Merchandise Sold = Opening Inventory + Net Purchase - Closing Inventory
= 2500 + 2500 - 2100
Cost of Merchandise Sold = $2,900

4) Net Sales = Gross Sales - Sales Discount
= 25000 - 3000
Net Sales = 22000

Cost of Goods Sold = Opening Inventory + Net Purchase - Closing Inventory
= 2000 + 4000 - 2800
Cost of Goods Sold = $3,200

Gross Profit = Net Sales - Cost of Goods Sold
= 22000 - 3200
Gross Profit = $18,800

jeff jeffy answered 2 years ago

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