Question

4. Use the following table to calculate the amounts listed below: Hellitech Corporation – Selected Data Credit Sales $127,382 Cost of Goods Sold $76,157 Beginning Inventory $10,583 ENDING INVENTORY $13,685 Accounts Receivable BEGINING $5,130 ENDING $5,690. Accounts Payable BEGINING $7,205, ENDING $8,105.

What is the:

? Inventory Period ? Accounts Receivable Period ? Accounts Payable Period ? Operating Cycle ? Cash Cycle

Answer 1

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($10,583 + $13,685) / 2
Average Inventory = $12,134

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($5,130 + $5,690) / 2
Average Accounts Receivable = $5,410

Average Accounts Payable = (Beginning Accounts Payable + Ending Accounts Payable) / 2
Average Accounts Payable = ($7,205 + $8,105) / 2
Average Accounts Payable = $7,655

Inventory Period = 365 * Average Inventory / Cost of Goods Sold
Inventory Period = 365 * $12,134 / $76,157
Inventory Period = 58.15 days

Accounts Receivable Period = 365 * Average Accounts Receivable / Credit Sales
Accounts Receivable Period = 365 * $5,410 / $127,382
Accounts Receivable Period = 15.50 days

Accounts Payable Period = 365 * Average Accounts Payable / Cost of Goods Sold
Accounts Payable Period = 365 * $7,655 / $76,157
Accounts Payable Period = 36.69 days

Operating Cycle = Inventory Period + Accounts Receivable Period
Operating Cycle = 58.15 days + 15.50 days
Operating Cycle = 73.65 days

Cash Cycle = Operating Cycle - Accounts Payable Period
Cash Cycle = 73.65 days - 36.69 days
Cash Cycle = 36.96 days