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1.
Bill's Produce does 60 percent of its business during June, July, and August.
For Year Ended For Year Ended
December 31, 2010 July 31, 2010
Net Sales
Receivables, less allowance for
doubtful accounts:
RM700,000
RM690,000
Beginning of period
(allowance, January 1, RM2,000;
August 1, RM3,000)
RM 45,000
RM 80,000
RM 50,000
RM 85,000
End of period
(allowance, December 31,
RM3,000; July 31,
RM3,500)
Required:
a. Compute the days' sales in receivables for July 31, 2010, and December 31, 2010,
based on the data above.
b. Compute the accounts receivable turnover for the period ended July 31, 2010, and
December 31, 2010.
c. Comment on the results from (a) and (b).
2.
Anne Elizabeth Company's Balance Sheet for December 31, 2010, and Income Statement
For the Year Ended December 31, 2010, are given below.
Balance Sheet
Anne Elizabeth Company
December 31, 2010
2010
Assets:
Current Assets:
Cash
Marketable Securities
Accounts Receivable, less allowance of $10,000
RM 50,450
25,000
60,000
2009
RM 28,538
20,500
50,000
Inventory, Lifo
Prepaid
Total Current Assets
90,000
8,000
RM233,450
70,000
7,000
RM176,038
9,000
8,000
220,000
210,000
RM229,000 RM218,000
(68,000)
(60,000)
RM394,450 RM334,038
RM 35,000
8,000
7,000
RM 50,000
RM 30,000
7,000
6,000
RM 43,000
40,000
11,038
60,000
244,450
RM304,450
RM394,450
60,000
220,000
RM280,000
RM334,038
Long-Term Debt
Shareholders' Equity:
Common Shares
Retained Earnings
Total Liabilities and Shareholders' Equity
Income Statement
Anne Elizabeth Company
For the Year Ended December 31, 2010
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling, general, and administrative
Interest
Earnings before income taxes
Income taxes
Net earnings
2010
RM718,500
580,000
RM138,500
2009
RM650,500
520,000
RM130,500
2008
RM640,000
515,000
RM125,000
RM 71,000
4,000
RM 75,000
RM 63,500
30,000
RM 33,500
RM 67,000
3,000
RM 70,000
RM 60,500
29,000
RM 31,500
RM 65,000
2,500
RM 67,500
RM 57,500
28,000
RM 29,500
Required:
a. Compute the following ratios for 2010:
1. Accounts receivable turnover
2. Merchandise inventory turnover
3. Working capital
4. Current ratio
5. Acid-test ratio (conservative)
6. Sales to working capital
3.
A. The ability of an entity to maintain its short-term debt is important to all users of financial
statements. When analysing the short-term debt-paying ability of a company, there is a very
close relationship between the current assets and the current liabilities. Any action taken by
the company about its current assets and its current liabilities policy will determine its
survival in the future.
REQUIRED:
Analyze the effect of a companys policy that delays its payment of account payable on
inventory and sales, in each of the following situation:
(a) Short term
(b) Long term
B. Astana is one of the fastest growing manufacturing companies in Malaysia. The company has
maintained a current ratio above the industry average every year. However, the company still
having difficulty in maintaining its debt especially its account payable.
REQUIRED:
Discuss FOUR (4) reasons why above situation happens.