Self-Assessment HW8D (Operating Cycle and Cash Conversion cycle)

Question 1 ITberian Ham Inc. financial statements are presented in the table below. Based on the information in the table, and using a 365-day year, calculate operating cyc Round the answers to two decimal places Balance Sheet December 31, 20XX Income Statement, Year of 20XX Cash and marketable . $100,000 Accounts payable $200,000 Net sales (all credit) ~ $4,000,000.00 securities " Less: Cost of goods Accounts receivable $300,000 Notes payable $50,000 sold 8 $2,800,000.00 Inventories $500,000 Accrued expenses $60,000 Selling and Total t administrative 300,000.00 Prepaid expenses $10,000 o2 curren $310,000 ¢ liabilities expenses Total current assets $910,000 Long-term debt $300,000 Depreciation expense $100,000.00 Par value and paid- Gross fixed assets $1,600,000 ina_rc:;;’; P $200,000 EBIT $800,000.00 ! Interest expense $30,000.00 Less: accumulated ceumd $400,000 Retained Earnings $1,300,000 ) depreciation Earnings before taxes $770,000.00 Netfied assels $1.200000 Common Equity 1,500,000 Income taxes $308.000.00 Total assets s2110000 "0t/ liabilitiesand o) 115 600 Net income $462,00000 owner’s equity Your Answer: ] Answer W Hide Check my answer Step 1: Average Day’s Cost of Goods Sold = COGS/365 = $7,671.23 Step 2: Days of Sales in Inventory = Inventories / Average Day's Cost of Good Sold = $500,000/87.671.23 = 65.18 Step 3: Average Credit Sales per Day = Credit Sales/365 = $4,000,000/365 = $10,958.90 Step 4: Days of Sales in Receivables = Accounts Receivable / Average Credit Sales per Day = $300,000 /$10,958.90 = 27.38 Step 5: Operating cycle = result of step 2 + result of step 4 = 65.18 +27.38 =92.55

Question 2 Tberian Ham Inc. financial statements are presented in the table below. Based on the information in the table, and using a 363-day year, calculate Average Day's Purchases. Round the answers to two decimal places Balance Sheet December 31, 20XX Cash and marketable i $100000 Accounts payable $200,000 securities Accounts receivable $300,000 Notespayable $50,000 Inventories $500000 Accrued expenses $60,000 Total it Prepaid expenses $10,000 fotal curren! $310,000 liabilities Total current assets $910,000 Long-term debt $300,000 ) Par value and paid- Gross fixed assets ~ $1,600000 - $200,000 in-capital Less: accumulated ) ! e $400000 Retained Earnings $1,300,000 depreciation Net fixed assets $1,200000 Common Equity 1,500,000 Total liabilities and Total assets $2110000 ~ OfNEbIesand o5 110,000 owner’s equity

Question 3 Iberian Ham Inc. financial statements are presented in the table below. Based on the information in the table, and using a 365-day year, calculate Days payables outstanding. Round the answers to two decimal places Balance Sheet December 31, 20XX Cash and marketable L. $100,000 Accounts payable $200,000 securities Accounts receivable $300,000 Notes payable $50,000 Inventories $500,000 Accrued expenses $60,000 Total t Prepaid expenses $10,000 .o a“c.urren $310,000 liabilities Total current assets $910,000 Long-term debt ~ $300,000 Gross fixed assets $1,600,000 2" value and paid- o5 550 in-capital Less:accumulated ¢ )00,000 Retained Earnings $1,300,000 depreciation Net fixed assets Total assets Income Statement, Year of 20XX Net sales (all credit) Less: Cost of goods sold Selling and administrative expenses Depreciation expense EBIT Interest expense Earnings before taxes Income taxes Net income $1,200,000 Common Equity 1,500,000 Total liabilities and $2,110,000 ) . $2,110,000 owner’s equity $4,000,000.00 $2,800,000.00 $300,000.00 Your Answer: $800,000.00 Answer $30,000.00 W Hide Check my answer $770,000.00 $308,000.00 Step 1: Calculate Average Day’s Purchases = (COGS) /365 = $2,800,000/365 = $7,671.23 $462,000.00 Step 2: Calculate Days payables outstanding = Accounts payable /Average Day’s Purchases = $200,000 / $7.671.23 = 26.07

Question 4 Tberian Ham Inc. financial statements are presented in the table below. Based on the information in the table, and using a 363-day year, calculate cash conversion cycle Round the answers to two decimal places Balance Sheet December 31, 20XX Cash and marketable i $100000 Accounts payable $200,000 securities Accounts receivable $300,000 Notespayable $50,000 Inventories $500000 Accrued expenses $60,000 Prepaid $10,000 Total current $310,000 repaid expenses - liabilities g Total current assets $910,000 Long-term debt $300,000 ) Par value and paid- Gross fixed assets ~ $1,600000 - . $200,000 in-capital Less: lated ess: accumulated o166, 000 Retained Earnings $1,300,000 depreciation Net fixed assets $1,200000 Common Equity 1,500,000 Total liabilities and Total assets $2110000 [0%MRbItEsand o) 446 000 owner’s equity Income Statement, Year of 20XX Net sales (all credit) $4,000,000.00 Less: Cost of goods $2,800,000.00 sold Selling and administrative $300,000.00 expenses Depreciation expense $100,000.00 EBIT $800,000.00 Interest expense $30,000.00 Earnings before taxes $770,000.00 Income taxes $308,000.00 Net income $462,000.00