Exercise 139 Cullumber Company has these comparative balance

Exercise 13-9 Cullumber Company has these comparative balance sheet data: CULLUMBER COMPANY Balance Sheets December 31 2017 2016 Cash Accounts receivable (net) Inventory Plant assets (net) $ 30,495 142,310 121,980 406,600 $701,385 $ 101,650 203,300 284,620 111,815 $701,385 $60,990 121,980 101,650 365,940 $650,560 $121,980 203,300 243,960 81,320 $650,560 Accounts payable Mortgage payable (15%) Common stock, $10 par dy Retained earnings Additional information for 2017: 1. Net income was $32,700. 2. Sales on account were $382,800. Sales returns and allowances amounted to $27, 100. 3. Cost of goods sold was $224,200. 4. Net cash provided by operating activities was $58,800. 5. Capital expenditures were $28,800, and cash dividends were $14,400.

Solution

a) Current ratio current assets/current liabilities (cash+account receivable+inventory)/accounts payable (30495+142310+121980)/101650 2.9 answer b) Accounts receivable turnover net sales/average account receivable net sales total sales 382,800 less:Sales return and allowances -27,100 net sales 355,700 Average account receivable =(opening + ending)/2 (142310+121980)/2 132145 Accounts receivable turnover = 355700/132145 2.7 answer c) Average collection period = 365/2.7 135.2 days if this is not correct then try 135.6 days d) inventory turnover cost of goods sold/average inventory Average inventory =(opening + ending)/2 (121980+101650)/2 111815 inventory turnover = 224200/111,815 2.01 answer e) Days in inventory = 365/ inventory turnover 181.6 answer f) Free cash flow cash from operating activites-capital expenditure-dividends 58,800-28,800-14,400 15600 answere