Question

In: Accounting

Last year, HCC, Inc had Sales of $500,000, cost of goods sold of $290,000, ending accounts...

Last year, HCC, Inc had Sales of $500,000, cost of goods sold of $290,000, ending accounts receivable of $75,000 and ending inventory balance of $25,000. The company’s inventory turnover was closest to:

A. 12.08 B. 11.60 C. 5.80 D. 11.15
Granger Corp had $180,000 in Sales on account last year and offered a 10% discount. The ending accounts receivable balance was $14,000, after bad debt expense of $5,000. The company’s average collection period (DSO) was closest to:

A. 20.3 days B. 28.4 days C. 36.5 days D. 56.8 days
Falmouth Corp. debt-to-equity ratio is 0.4. Current Assets are $300,000, long-term debt liabilities are $200,000 and working capital is $140,000. Total assets for the corporation must be:

A. $600,000 B. $1,260,000 C. $800,000 D. $1,280,000
A company that pays cash for a used vehicle has the following affect:
1. No change on the working capital ratio
2. Decrease in working capital
3. Increase in working capital
4. Nochangeinworkingcapital
PKRK Corporation has budgeted cost of raw materials purchases in Feb to be $100,000, Mar will be $140,0000 and April will be $150,000. They pay for 20% of its raw materials purchases in the month of purchase, 20% in the following month and the remainder the next month. The company’s accounts payable at the end of April is expected to be
1. $118,000
2. $264,000
3. $204,000
4. $90,000

Expert Solution

1. Inventory Turnover Ratio = Cost of Goods Sold / Inventory

Cost of Goods Sold = $290,000

Ending Inventory = $25,000 (Note: Generally Average Inventory is considered. However, since beginning inventory is not given, ending invetory is considered)

Hence,

Inventory Turnover = 290,000 / 25,000

= 11.60 times

Option B - 11.60

2. Average Collection Period = Average Accounts Receivable / Net Credit Sales * 360

Average Accounts Receivable = (Beginning Balance + Ending Balance) / 2

= [(14,000+5,000) + 14,000] / 2

= [19,000 + 14,000] / 2

= 33,000 / 2

= $16,500

Net Credit Sales = Credit Sales - Discounts

= 180,000 - (180,000*10%)

= 180,000 - 18,000

= $162,000

Average Collection Period = 16,500 / 162,000 * 360

= 36.67 days

Option C - 36.5 days

3. Working Capital = Current Assets - Current Liabilities

While paying cash for a used vehicle, the entry will be as follows:

Vehicle (Debit)

Cash (Credit)

Vehicle is a Fixed Asset and the balance in Fixed Assets Increases, while Cash is a Current Asset and the balance in Current Asset Decreases.

Since Current Asset decreases, the working capital will also decrease to the same extent.

Option B - Decrease in Working Capital

4. Accounts Payable in the end of April:

= (0 of Feb month payable) + (60% of March month payable) + (80% of April month payable)

= 0 + (140,000 * 60%) + (150,000 * 80%)

= 0 + 84,000 + 120,000

= $204,000

Option C - $204,000

ekkarill92 answered 2 years ago

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