How to solve these? Question 2

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using cost of goods sold and a 365-day year, calculate Days of Sales in Inventory (using cost of goods sold).

Round the answers to two decimal places

Balance Sheet December 31, 2011

Cash and marketable securities	$143,000	Accounts payable	$278,000
Accounts receivable	$354,000	Notes payable	$87,000
Inventories	$672,000	Accrued expenses	$65,000
Prepaid expenses	$12,500	Total current liabilities	$430,000
Total current assets	$1,181,500	Long-term debt	$284,000
Gross fixed assets	$1,675,000	Par value and paid-in-capital	$228,000
Less: accumulated depreciation	$500,000	Retained Earnings	$1,414,500
Net fixed assets	$1,175,000	Common Equity	1,642,500
Total assets	$2,356,500	Total liabilities and owners equity	$2,356,500

Income Statement Year of 2011

Net sales (all credit)	$3,136,600.00
Less: Cost of goods sold	$2,195,620.00
Selling and administrative expenses	$345,000.00
Depreciation expense	$146,000.00
EBIT	$449,980.00
Interest expense	$45,300.00
Earnings before taxes	$404,680.00
Income taxes	$161,872.00
Net income	$242,808.00

Answer:

(111.71)

Average Credit Sales per Day

Question 3

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate Average Credit Sales per Day.

Round the answers to two decimal places

Balance Sheet December 31, 2012

Cash and marketable securities	$198,000	Accounts payable	$288,000
Accounts receivable	$469,000	Notes payable	$65,000
Inventories	$577,000	Accrued expenses	$84,000
Prepaid expenses	$15,700	Total current liabilities	$437,000
Total current assets	$1,259,700	Long-term debt	$237,000
Gross fixed assets	$1,954,000	Par value and paid-in-capital	$199,000
Less: accumulated depreciation	$476,000	Retained Earnings	$1,864,700
Net fixed assets	$1,478,000	Common Equity	2,063,700
Total assets	$2,737,700	Total liabilities and owners equity	$2,737,700

Income Statement, Year of 2012

Net sales (all credit)	$7,546,600.00
Less: Cost of goods sold	$6,112,746.00
Selling and administrative expenses	$349,000.00
Depreciation expense	$145,000.00
EBIT	$939,854.00
Interest expense	$49,500.00
Earnings before taxes	$890,354.00
Income taxes	$356,141.60
Net income	$534,212.40

Answer:

(20,675.60)

Days of Sales in Receivables

Question 4

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate the average collection period (also called Days of Sales in Receivables or Number of Days of Credit).

Round the answers to two decimal places

Balance Sheet December 31, 2013

Cash and marketable securities	$112,000	Accounts payable	$211,000
Accounts receivable	$325,000	Notes payable	$51,500
Inventories	$426,000	Accrued expenses	$50,100
Prepaid expenses	$10,700	Total current liabilities	$312,600
Total current assets	$873,700	Long-term debt	$225,000
Gross fixed assets	$1,514,000	Par value and paid-in-capital	$117,000
Less: accumulated depreciation	$315,000	Retained Earnings	$1,418,100
Net fixed assets	$1,199,000	Common Equity	1,535,100
Total assets	$2,072,700	Total liabilities and owners equity	$2,072,700

Income Statement, Year of 2013

Net sales (all credit)	$3,256,600.00
Less: Cost of goods sold	$2,572,714.00
Selling and administrative expenses	$323,000.00
Depreciation expense	$115,000.00
EBIT	$245,886.00
Interest expense	$29,600.00
Earnings before taxes	$216,286.00
Income taxes	$86,514.40
Net income	$129,771.60

Answer:

(36.43)

Operating Cycle

Question 5

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate operating cycle.

Round the answers to two decimal places

Balance Sheet December 31, 2012

Cash and marketable securities	$198,000	Accounts payable	$288,000
Accounts receivable	$469,000	Notes payable	$65,000
Inventories	$577,000	Accrued expenses	$84,000
Prepaid expenses	$15,700	Total current liabilities	$437,000
Total current assets	$1,259,700	Long-term debt	$237,000
Gross fixed assets	$1,954,000	Par value and paid-in-capital	$199,000
Less: accumulated depreciation	$476,000	Retained Earnings	$1,864,700
Net fixed assets	$1,478,000	Common Equity	2,063,700
Total assets	$2,737,700	Total liabilities and owners equity	$2,737,700

Income Statement, Year of 2012

Net sales (all credit)	$7,546,600.00
Less: Cost of goods sold	$6,112,746.00
Selling and administrative expenses	$349,000.00
Depreciation expense	$145,000.00
EBIT	$939,854.00
Interest expense	$49,500.00
Earnings before taxes	$890,354.00
Income taxes	$356,141.60
Net income	$534,212.40

Answer:

		(57.14)
Average Day's Purchases

Question 6

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate Average Days Purchases.

Round the answers to two decimal places

Balance Sheet December 31, 2011

Cash and marketable securities	$143,000	Accounts payable	$278,000
Accounts receivable	$354,000	Notes payable	$87,000
Inventories	$672,000	Accrued expenses	$65,000
Prepaid expenses	$12,500	Total current liabilities	$430,000
Total current assets	$1,181,500	Long-term debt	$284,000
Gross fixed assets	$1,675,000	Par value and paid-in-capital	$228,000
Less: accumulated depreciation	$500,000	Retained Earnings	$1,414,500
Net fixed assets	$1,175,000	Common Equity	1,642,500
Total assets	$2,356,500	Total liabilities and owners equity	$2,356,500

Income Statement Year of 2011

Net sales (all credit)	$3,136,600.00
Less: Cost of goods sold	$2,195,620.00
Selling and administrative expenses	$345,000.00
Depreciation expense	$146,000.00
EBIT	$449,980.00
Interest expense	$45,300.00
Earnings before taxes	$404,680.00
Income taxes	$161,872.00
Net income	$242,808.00

Answer:

		(5,615.40)
Days payables outstanding

Question 7

a) Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate Days payables outstanding.

Round the answers to two decimal places

Balance Sheet December 31, 2014

Cash and marketable securities	$132,000	Accounts payable	$399,000
Accounts receivable	$311,000	Notes payable	$98,500
Inventories	$512,000	Accrued expenses	$89,300
Prepaid expenses	$11,300	Total current liabilities	$586,800
Total current assets	$966,300	Long-term debt	$799,400
Gross fixed assets	$2,104,000	Par value and paid-in-capital	$298,000
Less: accumulated depreciation	$398,000	Retained Earnings	$988,100
Net fixed assets	$1,706,000	Common Equity	1,286,100
Total assets	$2,672,300	Total liabilities and owners equity	$2,672,300

Income Statement, Year of 2014

Net sales (all credit)	$4,276,600.00
Less: Cost of goods sold	$3,292,982.00
Selling and administrative expenses	$349,000.00
Depreciation expense	$148,000.00
EBIT	$486,618.00
Interest expense	$49,600.00
Earnings before taxes	$437,018.00
Income taxes	$174,807.20
Net income	$262,210.80

Answer:

		(46.31)
Cash Conversion Cycle

Question 8

American Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, and using a 365-day year, calculate cash conversion cycle

Round the answers to two decimal places

Balance Sheet December 31, 2010

Cash and marketable securities	$102,000	Accounts payable	$287,000
Accounts receivable	$299,000	Notes payable	$61,200
Inventories	$628,000	Accrued expenses	$51,900
Prepaid expenses	$10,300	Total current liabilities	$400,100
Total current assets	$1,039,300	Long-term debt	$415,000
Gross fixed assets	$1,502,000	Par value and paid-in-capital	$376,000
Less: accumulated depreciation	$312,000	Retained Earnings	$1,038,200
Net fixed assets	$1,190,000	Common Equity	1,414,200
Total assets	$2,229,300	Total liabilities and owners equity	$2,229,300

Income statement, Year of 2010

Net sales (all credit)	$6,387,700.00
Less: Cost of goods sold	$4,726,898.00
Selling and administrative expenses	$345,000.00
Depreciation expense	$148,000.00
EBIT	$1,167,802.00
Interest expense	$50,600.00
Earnings before taxes	$1,117,202.00
Income taxes	$446,880.80
Net income	$670,321.20

Answer: