Presented below is an incomplete income statement and an incomplete comparative balance sheet of Cotte Corporation. Additional
Question:
Presented below is an incomplete income statement and an incomplete comparative balance sheet of Cotte Corporation.
Additional information:1. The receivables turnover for 2011 is 10 times.2. All sales are on account.3. The profit margin for 2011 is 14.5%.4. Return on assets is 22% for 2011.5. The current ratio on December 31, 2011, is 3.0.6. The inventory turnover for 2011 is 4.8 times.InstructionsCompute the missing information given the ratios above. Show computations.
COTTE CORPORATION Income Statement For the Year Ended December 31, 2011 $11,000,000 Sales Cost of goods sold Gross profit Operating expenses 1,665,000 Income from operations Other expenses and losses Interest expense Income before income taxes Income tax expense 560,000 Net income COTTE CORPORATION Balance Sheets December 31 2011 Assets 2010 Current assets $ 450,000 $ 375,000 Cash Accounts receivable (net) Inventory 950,000 1,720,000 Total current assets 3,045,000 Plant assets (net) 4,620,000 3,955,000 2$ $7,000,000 Total assets Liabilities and Stockholders' Equity $ 825,000 Current liabilities Long-term notes payable 2,800,000 Total liabilities 3,625,000 Common stock, $1 par Retained earnings 3,000,000 400,000 3,000,000 375,000 Total stockholders' equity 3,400,000 3,375,000 Total liabilities and stockholders' equity $7,000,000
Step by Step Answer:
Net income 11000000 X 145 1595000 Income before income taxes 1595000 560000 21...View the full answer
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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