1. North Side Wholesalers has sales of $948,000.

The cost of goods sold is equal to 72

B. 12.30 days
Inventory turnover = ($948,000 0.72)/$23,000 = 29.6765
Inventory period = 365/29.6765 = 12.30 days
2. The Bear Rug has sales of $811,000. The cost of goods sold is equal to 63 percent
of sales. The beginning accounts receivable balance is $41,000 and the ending
accounts receivable balance is $38,000. How long on average does it take the firm to
collect its receivables?
A. 17.26 days
B. 17.78 days
C. 18.58 days
D. 20.44 days
E. 29.77 days

B. 17.78 days
Receivables turnover = $811,000/[($41,000 + $38,000)/2] = 20.53165
Receivables period = 365/20.53165 = 17.78 Days
3. The Wire House purchases its inventory one quarter prior to the quarter of sale. The
purchase price is 55 percent of the sales price. The accounts payable period is 45 days.
The accounts payable balance at the beginning of quarter one is $62,000. What is the
amount of the expected disbursements for quarter two given the following expected
quarterly sales?
A. $20,500
B. $21,725
C. $24,250
D. $26,000
E. $26,675
B. $21,725
Q2 disbursements = [(45/90) (0.55) $36,000] + [(45/90) (0.55) $43,000] = $21,725
4. The Mountain Top Shoppe has sales of $512,000, average accounts receivable of
$31,400 and average accounts payable of $24,800. The cost of goods sold is
equivalent to 71 percent of sales. How long does it take The Mountain Top Shoppe to
pay its suppliers?
A. 21.76 days
B. 22.38 days
C. 24.90 days
D. 25.89 days
E. 26.67 days
C. 24.90 days
Payables turnover = ($512,000 0.71)/$24,800 = 14.6581
Payables period = 365/14.6581 = 24.90 days

5. The Blue Star has sales of $387,000, costs of goods sold of $259,000, average
accounts receivable of $9,800, and average accounts payable of $12,600. How long
does it take for the firm's credit customers to pay for their purchases?
A. 7.67 days
B. 8.78 days
C. 9.24 days
D. 11.88 days
E. 13.81 days
C. 9.24 days
Receivables turnover = $387,000/$9,800 = 39.4898
Receivables period = 365/39.4898 = 9.24 days
C. 9.24 days
Receivables turnover = $387,000/$9,800 = 39.4898
Receivables period = 365/39.4898 = 9.24 days

6. The Dog House expects sales of $560, $650, $670, and $610 for the months of May
through August, respectively. The firm collects 20 percent of sales in the month of
sale, 70 percent in the month following the month of sale, and 8 percent in the second
month following the month of sale. The remaining 2 percent of sales is never
collected. How much money does the firm expect to collect in the month of August?
A. $621
B. $628
C. $633
D. $639
E. $643
E. $643
August collections = 0.20($610) + 0.70($670) + 0.08($650) = $643
7. Breakwater Aquatics has a 45 day accounts receivable period. The estimated
quarterly sales for this year, starting with the first quarter, are $6,800, $7,100, $8,200,
and $6,400, respectively. What is the accounts receivable balance at the beginning of
the third quarter? Assume a year has 360 days.
A. $3,400
B. $3,550
C. $6,950
D. $7,100
E. $7,650

B. $3,550
A/R Begin Q3 = A/R End Q2 = (45/90) $7,100 = $3,550
8. HG Livery Supply had a beginning accounts payable balance of $57,300 and an
ending accounts payable balance of $55,100. Sales for the period were $610,000 and
costs of goods sold were $442,000. What is the payables turnover rate?
A. 7.86 times
B. 8.39 times
C. 9.02 times
D. 9.86 times
E. 10.85 times
A. 7.86 times
Payables turnover = $442,000/[($57,300 + $55,100)/2)] = 7.86 times
9. The Athletic Sports Store has a beginning receivables balance on January 1 of $410.
Sales for January through April are $440, $460, $690, and $720, respectively. The
accounts receivable period is 60 days. How much did the firm collect in the month of
April? Assume a year has 360 days.
A. $410
B. $440
C. $460
D. $690
E. $720
C. $460
April collections = February sales = $460
10. Your firm has an inventory turnover rate of 14, a payables turnover rate of 8, and a
receivables turnover rate of 19. How long is your firm's operating cycle?
A. 45.06 days
B. 45.28 days
C. 45.63 days
D. 53.13 days
E. 53.78 days

B. 45.28 days
Inventory period = 365/14 = 26.07 days
Accounts receivable period = 365/19 = 19.21 days
Operating cycle = 26.07 + 19.21 days = 45.28 days
11. Davis and Davis have expected sales of $490, $465, $450, and $570 for the
months of January through April, respectively. The accounts receivable period is 28
days. What is the accounts receivable balance at the end of March? Assume a year has
360 days.
A. $420
B. $426
C. $440
D. $450
E. $482
A. $420
March ending receivables = (28/30) $450 = $420
12. Merryl Enterprises currently has an operating cycle of 62 days. The firm is
analyzing some operational changes, which are expected to increase the accounts
receivable period by 2 days and decrease the inventory period by 5 days. The accounts
payable turnover rate is expected to increase from 42 to 46 times per year. If all of
these changes are adopted, what will the firm's new operating cycle be?
A. 51 days
B. 57 days
C. 59 days
D. 60 days
E. 65 days

C. 59 days
Operating cycle = 62 + 2 - 5 = 59 days
13. Forest Gardens, Inc., has a beginning receivables balance on February 1 of $730.
Sales for February through May are $720, $760, $820, and $850, respectively. The
accounts receivable period is 30 days. What is the amount of the April collections?
Assume a year has 360 days.
A. $720
B. $760
C. $790
D. $820
E. $850
B. $760
In April, the firm would collect March sales of $760.
14. On average, Furniture & More is able to sell its inventory in 27 days. The firm
takes 87 days on average to pay for its purchases. On the other hand, its average
customer pays with a credit card which allows the firm to collect its receivables in 4
days. Given this information, what is the length of operating cycle?
A. 31 days
B. 38 days
C. 45 days
D. 56 days
E. 62 days

A. 31 days
Operating cycle = 27 + 4 = 31 days
15. Tall Guys Clothing has a 45 day collection period. Sales for the next calendar year
are estimated at $2,100, $1,600, $2,500 and $2,300, respectively, by quarter, starting
with the first quarter of the year. Given this information, which one of the following
statements is correct? Assume a year has 360 days.
A. The firm will collect $800 in Quarter 2.
B. The accounts receivable balance at the beginning of Quarter 4 will be $1,150.
C. The firm will collect $2,000 in Quarter 3.
D. The firm will have an accounts receivable balance of $2,300 at the end of the year.
E. The firm will collect a total of $2,400 in Quarter 4.
E. The firm will collect a total of $2,400 in Quarter 4.
Q4 collections = 45/90 ($2,500) + 45/90 ($2,300) = $2,400
16. Interior Designs has an inventory period of 46 days, an accounts payable period of
38 days, and an accounts receivable period of 32 days. Management is considering an
offer from their suppliers to pay within 10 days and receive a 2 percent discount. If the
new discount is taken, the accounts payable period is expected to decline by 26 days.
If the new discount is taken, the operating cycle will be _____ days.
A. 52
B. 62
C. 71
D. 78
E. 91
D. 78
Original operating cycle = 46 + 32 = 78 days; The operating cycle will not change as
the accounts payable period does not affect the operating cycle, only the cash cycle.
17. A company currently has a 48 day cash cycle. Assume the firm changes its
operations such that it decreases its receivables period by 2 days, increases its
inventory period by 3 days, and increases its payables period by 4 days. What will the
length of the cash cycle be after these changes?
A. 42 days
B. 43 days
C. 45 days
D. 47 days
E. 49 days
C. 45 days
Cash cycle = 48 - 2 + 3 - 4 = 45 days
18. Metal Products Co. has an inventory period of 53 days, an accounts payable period
of 68 days, and an accounts receivable turnover rate of 18. What is the length of the
cash cycle?
A. 3.00 days
B. 5.28 days
C. 26.28 days
D. 71.00 days
E. 73.28 days
B. 5.28 days
Cash cycle = (365/18) + 53 - 68 = 5.28 days
19. Peterson's Antiquities currently has a 31 day cash cycle. Assume the firm changes
its operations such that it decreases its receivables period by 2 days, decreases its
inventory period by 3 days, and decreases its payables period by 4 days. What will the
length of the cash cycle be after these changes?
A. 22 days
B. 23 days
C. 29 days
D. 30 days
E. 31 days
D. 30 days
Cash cycle = 31 - 2 - 3 + 4 = 30 days
20. West Chester Automation has an inventory turnover of 16 and an accounts payable
turnover of 11. The accounts receivable period is 36 days. What is the length of the
cash cycle?
A. 5.67 days
B. 25.63 days
C. 41.00 days
D. 52.00 days
E. 58.81 days
B. 25.63 days
Cash cycle = (365/16) + 36 - (365/11) = 25.63 days