Question
49. The following are account balances of Brandy's Boats and Burt's Camping shops taken from the entity's recordsfor the year ended June 30, 2021: Brandy's
49. The following are account balances ofBrandy's BoatsandBurt's Campingshops taken from the entity's recordsfor the year ended June 30, 2021:
Brandy's Boat$(000)Burt's Camping$(000)
Cash & cash equivalent90140
Accounts receivables1,220460
Inventories1250680
Accumulated depreciation400320
Property, plant and equipment18801540
Accounts payable1200650
Revenue (all credit sales)75005000
Cost of goods sold 59004050
Long-term bank loan1300600
Selling expenses700400
General & admin expenses160200
Interest expense12560
Owner's capital (Beginning balance)925960
Additional information
Brandy's Boatsis in the business of selling boat parts.Burt's Campingis selling camping gear. Like lots of other retail shops, the Covid-19 situation has brought some hard times for the shops. Therefore all owners keep the profits in the business. The credit term for both shops is 5/N30. The accountant in Brandy's Boats has not included the depreciation of the year of $40,000 that is part of the general and admin expenses.
RatiosBrandy's BoatsBurt's Camping
Gross Profit Margin21.3%19%
Profit Margin7.7%5.8%
Current Ratio2.13 times1.97 times
Quick Ratio1.09 times0.92 times
Accounts Receivable Turnover6.15 times10.87 times
Days sales in receivables59.4 days33.6 days
Inventory Turnover4.7 times6 times
Daysof inventory on hand77 days61 days
c.Answer the MCQ (8 questions) below based on the information above and your answers in requirements a and b.
Which of the following options best describe the current year situation of the two businesses?
1. Brandy's Boats is better at managing its credit customer.
2. Burt's Camping is better at managing its credit customer.
3. It takes longer for Burt's Camping to collect cash from its customers.
4. It takes longer for Brandy's Boats to collect cash from its customers.
a.
1 and 4
b.
1 and 3
c.
2 and 4
d.
2 and 3
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