Question

Exercise 240 B. Jones Corporation has issued common stock only. The company has been successful and has a gross profit rate of 20%. The information shown below was taken from the company's financial statements. Beginning inventory $ 482,000 Purchases 4,146,000 Ending inventory Average accounts receivable 700,000 Average common stockholders' equity 3,100,000 Sales revenue (all on credit) 5,600,000 Net Income 341,000 Compute the following

Answer 1

Accounts receivable turnover:
Net credit sales (a)	$5,600,000
Average Accounts Receivables (b)	$700,000
Accounts receivable turnover (a/b)	8	times
Average collection period:
Number of days in a year (a)	365	days
Accounts receivable turnover (b)	8	times
Average collection period (a/b)	45.6	Days
Ending inventory:
Beginning inventory	$482,000
Add: Purchases	$4,346,000
Total goods available for sale	$4,828,000
Less: Cost of goods sold (100% - 20% = 80/100 * $5,600,000)	($4,480,000)
Ending inventory	$348,000
Inventory turnover:
Cost of Goods Sold (a)	$4,480,000
Average Inventory [($482,000 + $348,000)/2] (b)	$415,000
Inventory turnover (a/b)	10.8	times
Average days in inventory:
Number of days in a year (a)	365	days
Inventory turnover (b)	10.8	times
Average days in inventory (a/b)	33.8	Days
Return on common stockholders' equity:
Net income (a)	$341,000
Average common stockholders' equity (b)	$3,100,000
Return on common stockholders' equity (a/b)	11%