Question

- 17: Homowo Solected year-end financial statements of Cabot Corporation follow (All sales were on credit selected balance sheet amounts at December 31 2016, were inventory. $54.900, total assets $189,400, common stock. 584,000, and retained earnings. $36,546) $ 55. 158. 9. Cost of goods sold Gross profit Operating expenses Interest expense Income before taves Income taxes CABOT CORPORATION 12.00 9. Liabilities and County Accounts payable Acord es payable 20,000 income takes payable I n ternate payable, secured by sortgage on Pitt 5 242,300 Total liabilities and equity These are short-term notes receivable ansing from customer trade sales Required: Compute the following: current ratio. 2) acid-test ratio. 3 days Sales uncolected. 14) inventory turnover (5) days' sales in Inventory 51 0 UTV mesteret med. 8) pont margin ratio9 tots asset tuovet return on total assets and retum on common stocho des out (Do not found intermediate calculations)

Answer 1

Answer of Part 1:

Current Assets = Total Assets – Plant Assets, Net
Current Assets = $242,300 - $151,300
Current Assets = $91,000

Current Liabilities = Accounts Payable + Accrued Wages Payable + Income Taxes Payable
Current Liabilities = $17,500 + $5,000 + $3,100
Current Liabilities = $25,600

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $91,000 / $25,600
Current Ratio = 3.6

Answer of Part 2:

Acid Test Ratio = (Current Assets – Merchandise Inventory + Prepaid Expenses) / Current Liabilities
Acid Test Ratio = ($91,000 - $30,150 - $2,750) / $25,600
Acid Test Ratio = $58,100 / $25,600
Acid Test Ratio = 2.3

Answer of Part 3:

Days Sales Uncollected = 365 days * Current Receivable / Sales
Days Sales Uncollected = 365 * ($29,600 + $7,500) / $455,600
Days Sales Uncollected = 365 * $37,100 / $455,600
Days Sales Uncollected = 29.7 days

Answer of Part 4:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($54,900 + $30,150) / 2
Average Inventory = $42,525

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory turnover = $297,550 / $42,525
Inventory turnover = 7 times

Answer of Part 5:

Days Sales in Inventory = 365 days / Inventory Turnover
Days Sales in Inventory = 365 / 7
Days Sales in Inventory = 52.1 days