Question

Accounts payable, end of year Accounts receivable, net, end of year Inventory, end of year Net Sales Cost of goods sold Current Year $ 9,543 31, 225 11,844 159,000 77,000 Prior Year $ 13,488 19, 108 11,375 106.000 115,000 (1) Use the information above to compute the number of days in the cash conversion cycle for each year. (2) Did the company manage cash more effectively in the current year? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the information above to compute the number of days in the cash conversion cycle for each year. (Use 365 days in a year. Round calculations to the nearest whole day.) Current year 125 days Prior year 43 days Cash conversion cycle Required 1 Required 2 > 2.) A retailer pays $110,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here. Department Jewelry Cosmetics Housewares Tools Shoes Square feet occupied 1,290 (first-floor) 3,010 (first-floor) 1,935 (second-floor) 688 (second-floor) 1,677 (second-floor) The company allocates 65% of total rent expense to the first floor and 35% to the second floor, and then allocates rent expense for each floor to the departments occupying that floor on the basis of space occupied. Determine the rent expense to be allocated to each department Cost 71,500 38,500 110,000 Step 1: Allocate total rent expense between the two floors. Amount % of Total Allocated First floor $ 110,000 65% $ Second floor 110,000 35% Totals 100 % $ Step 2: Allocate these portions of total rent expense across the departments occupying each floor. First Floor Sq. Feet % of Total Jewelry Dept. 1,290 55 % Cosmetics Dept. 3,0101 45% Totals 4,300 100% $ Second Floor Sq. Feet % of Total Housewares Dept. Tools Dept. Shoes Dept. Cost Cost Totals

Answer 1

Answer -

Q. 1 Answer -

1. Answer -

	Current year	Prior year
Cash conversion cycle	83 days	59 days

Calculation:

Average age of inventory (AAI) = (Inventory / Cost of goods sold) * Days in a year

Current year:

Average age of inventory (AAI) = ($11844 / $77000) * 365 days

Average age of inventory (AAI) = 56 days

Prior year:

Average age of inventory (AAI) = ($11375 / $115000) * 365 days

Average age of inventory (AAI) = 36 days

Average collection period (ACP) = (Accounts receivable / Sales) * Days in a year

Current year:

Average collection period (ACP) = ($31225 / $159000) * 365 days

Average collection period (ACP) = 72 days

Prior year:

Average collection period (ACP) = ($19108 / $106000) * 365 days

Average collection period (ACP) = 66 days

Average payment period (APP) = (Accounts payable / Cost of goods sold) * Days in a year

Current year:

Average payment period (APP) = ($9543 / $77000) * 365 days

Average payment period (APP) = 45 days

Prior year:

Average payment period (APP) = ($13488 / $115000) * 365 days

Average payment period (APP) = 43 days

So,

Cash conversion cycle (CCC) = Average age of inventory (AAI) + Average collection period (ACP) - Average payment period (APP)

Current year:

Cash conversion cycle (CCC) = 56 + 72 - 45

Cash conversion cycle (CCC) = 83 days

Prior year:

Cash conversion cycle (CCC) = 36 + 66 - 43

Cash conversion cycle (CCC) = 59 days

2. Answer -

Company manage cash less effectively in the current year (83 days) than the prior year (59 days).

Q. 2 Answer -

Step 1: Allocate total rent expense between the two floors.
	Amount Allocated	% of Total	Cost
First floor	$110000	65%	$71500
Second floor	$110000	35%	$38500
Total		100%	$110000
Step 2: Allocate these portions of total rent expense across the departments occupying each floor.
First Floor	Sq. Feet	% of Total	Cost
Jewelry Dept.	1290	30%	$21450
Cosmetics Dept.	3010	70%	$50050
Total	4300	100%	$71500
Second Floor	Sq. Feet	% of Total	Cost
Housewares Dept.	1935	45%	$17325
Tools Dept.	688	16%	$6160
Shoes Dept.	1677	39%	$15015
Total	4300	100%	$38500

Calculation:

Step 1:

Cost = Amount allocated * Percent of total

1. First floor cost = $110000 * 65% = $71500

2. Second floor cost = $110000 * 35% = $38500

Step 2:

First floor:

Jewelry Dept. (% of Total) = (Jewelry Dept. Sq. feet / Total Sq. feet) * 100 = (1290 / 4300) * 100 = 30%

Cosmetics Dept. (% of Total) = (Cosmetics Dept. Sq. feet / Total Sq. feet) * 100 = (3010 / 4300) * 100 = 70%

Jewelry Dept. (Cost) = Total first floor cost * Percent of Jewelry Dept. = $71500 * 30% = $21450

Cosmetics Dept. (Cost) = Total first floor cost * Percent of Cosmetics Dept. = $71500 * 70% = $50050

Second floor:

Housewares Dept. (% of Total) = (Housewares Dept. Sq. feet / Total Sq. feet) * 100 = (1935 / 4300) * 100 = 45%

Shoes Dept. (% of Total) = (Shoes Dept. Sq. feet / Total Sq. feet) * 100 = (688 / 4300) * 100 = 16%

Tools Dept. (% of Total) = (Tools Dept. Sq. feet / Total Sq. feet) * 100 = (1677 / 4300) * 100 = 39%

Housewares Dept. (Cost) = Total second floor cost * Percent of Housewares Dept. = $38500 * 45% = $17325

Shoes Dept. (Cost) = Total second floor cost * Percent of Shoes Dept. = $38500 * 16% = $6160

Tools Dept. (Cost) = Total second floor cost * Percent of Tools Dept. = $38500 * 39% = $15015