Comment on the company with the shorter Days Inventory Outstanding. Should they maintain this efficiency, or should they slow down? Give advantages and disadvantages for both scenarios. Income StatementDec. 31, 2022Company ACompany BP850,000550,000SalesP1,350,000895,000Less: Cost of Goods SoldPurchases consisting 60% of COGS for both companiesGross Profit300,000455,000Less: ExpensesUtilities Expense55,00090,000Salaries Expense70,000115,000Advertising ExpenseInsurance Expense1,0002,0001,0002,000Depreciation ExpenseTaxable Income83,00090,00085,000161,000Income Tax (30%)27,00063,00048,300Net Income112,700 Statement of Financial PositionCompany ACompany BCurrent Assets2021 (Beg)2022 (End)2021 (Beg)2022 (End)P115,000101,000CashP42,000P58,000P75,000Marketable Securities36,00045,00025,00075,00032,00085,00055,000125,000200,00024,00024,00095,000150,000Accounts ReceivableInventoryPrepaid InsurancePrepaid AdvertisingNoncurrent Assets (all in book value)12,00011,00011,00022,00022,00012,000Furniture and Fixtures240,000192,000500,000450,000Delivery Van245,000210,000350,000315,000Current LiabilitiesNotes PayableAccounts Payable35,00032,000120,000100,00054,00060,000140,000125,000Noncurrent LiabilitiesBonds PayableShareholders' Equity220,000180,000550,000520,000Common Stock295,000295,000350,000350,000Retained Earnings90,000100,000163,000175,000

Efficiency in the management of stock is judged by inventory turnover ratio and days inventory…

Income Statement Dec. 31, 2022 Company A Company B Sales P850,000 P1,350,000 Less: Cost of Goods Sold 550,000 895,000 Purchases consisting 60% of COGS for both companies Gross Profit 300,000 455,000 Less: Expenses Utilities Expense 55,000 90,000 Salaries Expense Advertising Expense Insurance Expense 70,000 1,000 1,000 115,000 2,000 2,000 Depreciation Expense 83,000 85,000 Taxable Income 90,000 161,000 Income Tax (30%) 27,000 48,300 Not In como 62. 000 112 700

Income Statement Dec. 31, 2022 Company A Company B Sales P850,000 P1,350,000 Less: Cost of Goods Sold 550,000 895,000 Purchases consisting 60% of COGS for both companies Gross Profit 300,000 455,000 Less: Expenses Utilities Expense 55,000 90,000 Salaries Expense Advertising Expense Insurance Expense 70,000 1,000 1,000 115,000 2,000 2,000 Depreciation Expense 83,000 85,000 Taxable Income 90,000 161,000 Income Tax (30%) 27,000 48,300 Not In como 62. 000 112 700

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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