1. Company ABC wants to determine the liquidity of its receivables.
It has supplied you with the
following data regarding selected accounts for December 31, 2023, and 2022:
2023 2022
Net sales $1,180,178 $2,200,000
Receivables, less allowance for losses and discounts
Beginning of year (allowance for losses and discounts
, 2023—$12,300; 2022—$7,180) 240,360 230,180
End of year (allowance for losses and
discounts, 2023—$11,180; 2022—$12,300) 220,385 240,360
Compute the number of days’ sales in receivables for each year.
b. Compute the accounts receivable turnover for each year. (Use year-end gross receivables.)
c. Comment on the liquidity of the Company receivables
2. Balance sheet for Company XYZ 12/31/2024
Income statement
Please note that : The trade receivables at December 31, 2023, were $280,000, net of an allowance of
$8,000, for a gross receivables figure of $288,000. The inventory at December 31, 2023, was $565,000.
Compute the following:.
Working capital, current ratio, Acid test ratio, cash ratio, Days sales in receivables, Account receivables
turnover in days, Days sales in inventory, Operating cycle, and Inventory turnover in days.
Make sure you interpret each ratio.
3. ABC Company would like to compare its days’ sales in receivables with that of a competitor XYZ
Company. Both companies have had similar sales results in the past, but XYZ Company has had better
profit results. ABC Company suspects that one reason for the better profit results is that XYZ Company
did a better job of managing receivables. ABC Company uses a calendar year that ends on December 31,
while XYZ Company uses a fiscal year that ends on July 31. Information related to sales and receivables
of the two companies follows:
ABC company: YEAR END DECMEBR 31
Net sales $1,800,000
Receivables, less allowance for doubtful $110,000
accounts of $8,000
XYZ company:YEAR END JULY 31
Net sales $1,850,000
Receivables, less allowance for doubtful $60,000
accounts of $4,000
a. Compute the days’ sales in receivables for both companies. (Use year-end gross receivables.)
b. Comment on the results.
4. Current assets and current liabilities for companies A and B are summarized below.
Company A Company B
Current assets $400,000 $800,000
Current liabilities $200,000 $400,000
Working capital $200,000 $400,000
Evaluate the relative solvency of companies A and B.
5. The following data relate to inventory for the year ended December 31, 2023
A physical inventory on December 31, 2023, indicates that 400 units are on hand and that they came
from the March 1 purchase.
Compute the cost of goods sold for the year ended December 31, 2023, and the ending inventory under
the following cost assumptions:
a. First-in, first-out (FIFO)
b. Last-in, first-out (LIFO)
c. Average cost (weighted average)
d. Specific identification
