Chapter 6, Problem 3FSA

A.

Summary Introduction

Introduction: Cash in the company inflow and outflow in various ways like capital, purchase, withdraw, discount, sales. Cash and its equivalent mean items which have liquidity in market. Liquidity means the asset of the company which can be sold in market at reasonable price easily. Cash and its equivalents are the assets of the company which contains the highest liquidity in the company.

To determine: Computation of cash and cash equivalents, percentage, Days’ sales uncollected, collection of receivables.

Answer to Problem 3FSA

For current year total current asset is 15.9%, total assets is 12.2%, total current liabilities is 58.7% , total shareholder equity is 16.6%, for previous yeartotal current asset is 12.8%, total assets is 9.3%, total current liabilities is 63.5% , total shareholder equity is 17.9%

Explanation of Solution

Sr.	Particulars	Current Year	Prior Year
A.	Cash	32,111,442	22,636,744
B.	Accounts receivables	27,800,408	28,520,689
C.	Current assets	141,429,704	124,814,725
D.	Total current assets	201,341,554	175,972,158
E.	Total assets	262,174,324	242,179,521
F.	Current liabilities	54,704,095	50,502,909
G.	Shareholder equity	192,963,033	179,059,805
H.	Net sales	201,866,745	200,653,482

Cash and cash equivalent as a percentage oftotal current asset for current year:

  $\text{Total current asset}=\frac{32,111,442}{201,341,554}$

  $\text{Total current asset}=15.9\%$

Cash and cash equivalent as a percentage of total current asset for prior year:

  $\text{Total current asset}=\frac{22,636,744}{175,972,158}$

  $\text{Total current asset}=12.8\%$

Cash and cash equivalent as a percentage of total asset for current year:

  $\text{Total asset}=\frac{32,111,442}{262,174,324}$

  $\text{Total asset}=12.2\%$

Cash and cash equivalent as a percentage of total asset for prior year:

  $\text{Total asset}=\frac{22,636,744}{242,179,521}$

  $\text{Total asset}=09.3\%$

Cash and cash equivalent as a percentage of total current liabilities for current year:

  $\text{Total current liabilities}=\frac{32,111,442}{54,704,095}$

  $\text{Total current liabilities}=58.7\%$

Cash and cash equivalent as a percentage of total current liabilities for prior year:

  $\text{Total current liabilities}=\frac{32,111,442}{50,502,909}$

  $\text{Total current liabilities}=63.5\%$

Cash and cash equivalent as a percentage of equity shareholders for current year:

  $\text{Total equity shareholder}=\frac{32,111,442}{192,963,033}$

  $\text{Total equity shareholders}=16.6\%$

Cash and cash equivalent as a percentage of equity shareholders for prior year:

  $\text{Total equity shareholder}=\frac{32,111,442}{179,059,805}$

  $\text{Total equity shareholders}=17.9\%$

B.

Summary Introduction

Introduction: Cash in the company inflow and outflow in various ways like capital, purchase, withdraw, discount, sales. Cash and its equivalent mean items which have liquidity in market. Liquidity means the asset of the company which can be sold in market at reasonable price easily. Cash and its equivalents are the assets of the company which contains the highest liquidity in the company.

To determine: Computation of cash and cash equivalents, percentage, Days’ sales uncollected, collection of receivables.

Answer to Problem 3FSA

Percentage change of cash balances for current year and prior year is41.8%

Explanation of Solution

Percentage change of cash balances for current year and prior year is:

  $=\frac{\text{Current year cash balance - prior year cash balance}}{\text{Prior year cash balance}}$

  $=\frac{32111442-22636744}{22636744}$

  $=41.8\%$

C.

Summary Introduction

Introduction: Cash in the company inflow and outflow in various ways like capital, purchase, withdraw, discount, sales. Cash and its equivalent mean items which have liquidity in market. Liquidity means the asset of the company which can be sold in market at reasonable price easily. Cash and its equivalents are the assets of the company which contains the highest liquidity in the company.

To determine: Computation of cash and cash equivalents, percentage, Days’ sales uncollected, collection of receivables.

Answer to Problem 3FSA

Account receivables account for prior year isUncollected sales is 28,520,689 and for current year Uncollected salesis 27,800,408

Explanation of Solution

Account receivables account for prior year is:

Particulars	Amount	Particulars	Amount
To Balance b/d	-	By Cash A/C	$172,132,793$
To Sales	$200,653,482$	By balance c/d	$28,520,689$
Total	$200,653,482$	Total	$200,653,482$

Sales for the year- $200,653,482$

(-) Cash collected during the year- ( $172,132,793$)

Uncollected sales $28,520,689$

Account receivables account for current year is:

Particulars	Amount	Particulars	Amount
To Balance b/d	$28,520,689$	By Cash A/C	$202,587,026$
To Sales	$201,866,745$	By balance c/d	$27,800,408$
Total	$230,387,434$	Total	$230,387,434$

Sales for the year- $230,387,434$

(-) Cash collected during the year- ( $202,587,026$)

Uncollected sales $27,800,408$

D.

Summary Introduction

Introduction: Cash in the company inflow and outflow in various ways like capital, purchase, withdraw, discount, sales. Cash and its equivalent mean items which have liquidity in market. Liquidity means the asset of the company which can be sold in market at reasonable price easily. Cash and its equivalents are the assets of the company which contains the highest liquidity in the company.

To determine: Computation of cash and cash equivalents, percentage, Days’ sales uncollected, collection of receivables.

Answer to Problem 3FSA

There is a favorable change in collection of account receivables.

Explanation of Solution

Particulars	Current Year	Prior Year
Sales for the year	$230,387,434$	$200,653,482$
Less: Cash collected during the year	$202,587,026$	$172,132,793$
Percentage	$113.7\%$	$116.5\%$

As per the increase in percentage for cash collection is seen. So, there is a favorable change in collection of account receivables.