FRIZELL COMPANY Balance Sheets 2017 2016 14100 29100 Account

FRIZELL COMPANY Balance Sheets 2017 2016 14,100 29,100 Accounts receivable (net) 70,700 60,700 60,400 50,400 204,500 184,000 $349,700 $324,200 $49,500$59,800 | Mortgage payable (6%) 110,000 110,000 Common stock, $10 par 141,000 120,000 49,20034,400 $349,700 324,200 Inventory Plant assets (net) Accounts payable by Retained earnings Additional information for 2017: 1. Net income was $24,400. 2. Sales on account were $411,000. Sales returns and allowances were $19,900 3. Cost of goods sold was $195,600. Compute the following ratios at December 31, 2017. (Round answers to 1 decimal place, e.g, 1.6.) (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover

Solution

2017 a) Current assets cash 14,100 Accounts receivable 70,700 inventory 60,400 total current assets 145,200 current ratio = current assets/current liabilities 145,200/49,500 2.9 answer b) Acid- test ratio = (cash + account receivable)/current liabilities 2017 cash 14,100 Accounts receivable 70,700 total current assets 84,800 Acid-test ration = 84,800/49,500 1.7 answer c) Account receivable turnover = net sales/average account receivable Net sales total sales 411,000 less:sales return&allowance -19,900 Net sales 391,100 Average account receivable opening account receivable 70,700 ending account receivable 60,700 total 131,400 Average account receivable (131,400/2) 65700 Account receivable turnover = 391,100/65700 6.0 times answer d) inventory turnover = cost of goods sold/average inventory turnover cost of goods sold 195,600 Average inventory opening inventory 60,400 ending inventory 50,400 total inventory 110,800 Average inventory (110,800/2) 55400 inventory turnover = 195,600/55400 3.5 times answer