Question
Analysis of Activity Measures Based on the comparative income statement and balance sheet of Cowan Kitchen Counters, Inc., that follow: Cowan Kitchen Counters, Inc. Comparative
Analysis of Activity Measures
Based on the comparative income statement and balance sheet of Cowan Kitchen Counters, Inc., that follow:
Cowan Kitchen Counters, Inc.
Comparative Income Statement
For Years Ended December 31, 20-2 and 20-120-220-1Net Sales (all on account)$2,584,000$2,163,000Cost of goods sold1,868,2001,616,800Gross profit$715,800$546,200Operating expenses315,200221,800Other expense (interest)24,20024,200Income tax expense176,800106,300Net income$199,600$193,900
Cowan Kitchen Counters, Inc.
Comparative Balance Sheet
December 31, 20-2 and 20-120-220-1Cash$255,400$243,200Government notes250,000250,000Accounts receivable (net)903,500797,500Merchandise inventory983,600913,600Supplies and prepayments143,20047,500Land108,200108,200Building (net)330,000390,600Office equipment (net)17,70015,000Total assets$2,991,600$2,765,600Current liabilities (accounts payable)$703,000$532,000Bonds payable220,000240,000Total liabilities$923,000$772,000Common stock ($10 par, 180,000 shares)$1,800,000$1,800,000Retained earnings268,600193,600Total stockholders' equity$2,068,600$1,993,600Total liabilities and stockholders' equity$2,991,600$2,765,600
Compute the following activity measures for 20-2 (round all calculations to two decimal places): Use 365 days when computing the accounts receivable and merchandise inventory turnover.
a.Accounts receivable turnoverdaysb.Merchandise inventory turnoverdaysc.Asset turnoverto 1
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