Lion Corporation is concerned about a potential accumulated earnings tax liability. It accumulates E&P for working capital necessary to conduct its manufacturing business. The following data appear in its current year balance sheets.

Included in operating expenses are depreciation of $150,000 and federal income taxes of $100,000 (assume paid at one time rather than in installments).
a. What is Lion€™s operating cycle in days? As a decimal?
b. What is Lion€™s reasonable working capital amount as determined under the Bardahl formula?
c. What steps must Lion take to justify accumulating earnings that exceed the amount prescribed under the Bardahl formula?

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Account Beginning Balance Ending Balance Peak Balance for the Year Accounts receivable S300,00D S400,000 S400,000 Inventory 240,000 300,000 375,000 Accounts payable 150,000 200,000 220,000