At the end of the year, the following information was obtained from the accounting records of Zachery,
Question:
At the end of the year, the following information was obtained from the accounting records of
Zachery, Inc.
Sales (all on credit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,750,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,000
Average inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 375,000
Average accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . 290,000
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . 45,000
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 84,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 159,000
Average investment in assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000
Average stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 895,000
Instructions
a. From the information given, compute the following:
1. Inventory turnover.
2. Accounts receivable turnover.
3. Total operating expenses.
4. Gross profit percentage.
5. Return on average stockholders’ equity.
6. Return on average assets.
b. Zachery has an opportunity to obtain a long-term loan at an annual interest rate of 12 percent and could use this additional capital at the same rate of profitability as indicated by the given data. Would obtaining the loan be desirable from the viewpoint of the stockholders?Explain.
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello