Question

Calculating Cycles [LO1] Consider the following financial statement information for the Mediate Corporation:

Item Inventory Accounts receivable Accounts payable Credit sales Cost of goods sold Beginning $9.780 4,108 7,636 Ending $11,380 4,938 7.927 $89,804 56,384

Calculate the operating cycles. How do you interpret your answer?

Answer 1

Solution: Gross operating cycle > Inventory period + Accounts receivable period Net operating cycle + - Inventory period. Accounts receivable period Accounts payable period - Inventory period 365 Toventory tumover ratio 365 cost of goods sold. Avarage inventory 365 $56384 ( 9780+ 113 80 ) 365 5.33 68.48 days. 2 68.5 days Capprox.)

Account receivable period 365 -Accounts receivable ternover ratio - 365 Credit sales Avarage Accounts receivable 366 89804 4108 +4938 2 - 365 19.85 18.39 Accounts payable period 365 Accounts payable temover ratio 365 Credit Avarage purchases Account payables) 365 * 5 1984 (7636+7927 - (336779.27) 365 7.45 49 days (Approx). Note & Credit purchases

Page Cost of goods sold & closing inventory - opening inventory a) - 56384 & 11380 - 9780 $5 1984 Gooss operating cuple 68.5+ 18.39. - 25 86.89 Net Operating Cycle & - 68.5 +18.39 - 49 37.89