Excerpts from Stepney Corporations most recent balance sheet

Excerpts from Stepney Corporation\'s most recent balance sheet (in thousands of dollars) appear below:

Sales on account during the year totaled $1,330 thousand. Cost of goods sold was $835 thousand.

Compute the following current ratio for Year 2. (Round your answer to 2 decimal places.)

Compute the following acid-test ratio for Year 2. (Round your answer to 2 decimal places.)

Compute the following accounts receivable turnover for Year 2. (Round your answer to 2 decimal places.)

Compute the following average collection period for Year 2. (Use 365 days in a year. Round your intermediate calculations to 2 decimals places and your final answer to 1 decimal place.)

Compute the following inventory turnover for Year 2. (Round your answer to 2 decimal places. Omit the \"$\" sign in your response.)

Compute the following average sale period for Year 2. (Use 365 days in a year. Round your intermediate calculations to 2 decimals places and your final answer to 1 decimal place.)

Solution

a. Working capital for year 2 = current assets - current liabilities = $497,000 - $387,000 = $110,000

b. current ratio for year 2 = current assets/current liabilities = 497,000/387,000 = 1.28

c. acid test ratio for year 2 = (current assets - inventories)/curent liabilities = (497,000-190,000)/387,000 = 0.79

d. accounts receivable turnover = net sales/average accounts receivables = 1,330,000/(130,000+140,000)/2 = 1,330,000/135,000 = 9.85

e. average collection period = average accounts receivables/average daily sales = 135,000/(1,330,000/365) = 135,000/3643.8356 = 37.0 days

f. Inventory turnover = cost of goods sold/average inventory = 835,000/(190,000+230,000)/2 = 835,000/210,000 = 3.98

g. average sale period = 365/accounts receivable turnover = 365/9.85 = 37.0 days