Practice 1. solve for the Efficiency of the Given Company aple Company Statement of Financial Position as of December 31, 2014 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Cash P 120,000.00 Accounts Payable P 70,000.00 Marketable Securities P 35,000.00 Short-term notes P 55,000.00 Accounts Receivable P 45,000.00 Current Liabilities P 125,000.00 Inventories P 130,000.00 Long-term debt P 2,700,000.00 Current Assets P 330,000.00 Total Liabilities P 2,825,000.00 Equipment P 2,970,000.00 Common stock P 500,000.00 Buildings P 1,600,000.00 Retained earnings P 1,575,000.00 Fixed Assets P 4,570,000.00 Stockholders' equity P 2,075,000.00 Total Assets P 4,900,000.00 Total liabilities and equity P 4,900,000.00 Sample Company Statement of Financial Performance for the Year Ended December 31, 2014 Sales Revenue P 2,000,000.00 Cost of Sales/Service P (1,300,000.00) Gross Margin P 700,000.00 Operating Expenes P (199,000.00) Operating Profit P 501,000.00 Other Income P 5,000.00 Other Expenses P (2,800.00) Net Income before Tax P 503,200.00 P (150,960.00) Income Tax P 352,240.00 Net Income after Tax

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem 1Q
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Practice 1.
Solve for the Efficiency of the Given Company
Cample Company Statement of Financial Position as of December 31, 2014
ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Cash
P 120,000.00
Accounts Payable
P 70,000.00
Marketable Securities
P 35,000.00
Short-term notes
P 55,000.00
Accounts Receivable
P 45,000.00
Current Liabilities
P 125,000.00
Inventories
P 130,000.00
Long-term debt
P 2,700,000.00
Current Assets
P 330,000.00
Total Liabilities
P 2,825,000.00
Equipment
P 2,970,000.00
Common stock
P 500,000.00
Buildings
P 1,600,000.00
Retained earnings
P 1,575,000.00
Fixed Assets
P 4,570,000.00
Stockholders' equity
P 2,075,000.00
Total Assets
P 4,900,000.00
Total liabilities and equity
P 4,900,000.00
Sample Company Statement of Financial Performance for the Year Ended December 31, 2014
Sales Revenue
P 2,000,000.00
Cost of Sales/Service
P (1,300,000.00)
Gross Margin
P 700,000.00
Operating Expenes
P (199,000.00)
Operating Profit
P 501,000.00
Other Income
P 5,000.00
Other Expenses
P (2,800.00)
Net Income before Tax
P 503,200.00
P (150,960.00)
Income Tax
P 352,240.00
Net Income after Tax
Transcribed Image Text:Practice 1. Solve for the Efficiency of the Given Company Cample Company Statement of Financial Position as of December 31, 2014 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Cash P 120,000.00 Accounts Payable P 70,000.00 Marketable Securities P 35,000.00 Short-term notes P 55,000.00 Accounts Receivable P 45,000.00 Current Liabilities P 125,000.00 Inventories P 130,000.00 Long-term debt P 2,700,000.00 Current Assets P 330,000.00 Total Liabilities P 2,825,000.00 Equipment P 2,970,000.00 Common stock P 500,000.00 Buildings P 1,600,000.00 Retained earnings P 1,575,000.00 Fixed Assets P 4,570,000.00 Stockholders' equity P 2,075,000.00 Total Assets P 4,900,000.00 Total liabilities and equity P 4,900,000.00 Sample Company Statement of Financial Performance for the Year Ended December 31, 2014 Sales Revenue P 2,000,000.00 Cost of Sales/Service P (1,300,000.00) Gross Margin P 700,000.00 Operating Expenes P (199,000.00) Operating Profit P 501,000.00 Other Income P 5,000.00 Other Expenses P (2,800.00) Net Income before Tax P 503,200.00 P (150,960.00) Income Tax P 352,240.00 Net Income after Tax
GIVEN FORMULAS:
Sales
Accounts receivable turnover =
Accounts Receivable
365
Average collection period =
Accounts Receivable Turnover
Cost of goods sold
Inventory turnover =
Inventory
365
Average age of inventory =
Inventory Turnover
Purchases
Accounts payable turnover =
Inventory
365
Average payment period =
Accounts Payable Turnover
Operating Cycle = Average Collection Period + Average Age of Inventory
Cash Conversion Cycle = Average collection period + Average age of inventory -Average age of payables
OR
Cash Conversion Cycle = Operating Cycle -Average Age of Payables
%3D
Transcribed Image Text:GIVEN FORMULAS: Sales Accounts receivable turnover = Accounts Receivable 365 Average collection period = Accounts Receivable Turnover Cost of goods sold Inventory turnover = Inventory 365 Average age of inventory = Inventory Turnover Purchases Accounts payable turnover = Inventory 365 Average payment period = Accounts Payable Turnover Operating Cycle = Average Collection Period + Average Age of Inventory Cash Conversion Cycle = Average collection period + Average age of inventory -Average age of payables OR Cash Conversion Cycle = Operating Cycle -Average Age of Payables %3D
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