Question

Required information Exercise 13-8 Liquidity analysis and interpretation LO P3 [The following information applies to the questions displayed below.) Simon Company's year-end balance sheets follow. 2017 2016 2015 At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 32,230 $ 37,673 $ 39,243 89,400 62,800 50, 100 115,000 82,000 58,000 10,3799 ,889 4,360 304,774 283,313 248, 697 $ 551,783 $ 475,675 $ 400,400 $ 136,020 $ 79,585 $ 52,324 102,698 108,311 87,604 162,500 162,500 162,500 150,565 125,279 97,972 $ 551,783 $ 475,675 $ 400,400 The company's income statements for the years ended December 31, 2017 and 2016, follow. Assume that all sales are on credit: For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net income Earnings per share 2017 $ 717,318 $ 437,564 222,369 12,194 9,325 681,452 $ 35,866 $ 2.21 2016 $ 566,053 $ 367,934 143,211 13,019 8,491 532,655 $ 33,398 $ 2.06 Exercise 13-8 Part 1 (1) Compute days' sales uncollected Days' Sales Uncollected Choose Denominator: Choose Numerator: X Days 365 Accounts receivable $ $ 2017: 2016: = Days' Sales Uncollected Days' Sales Uncollected 0 days o days 1 Net sales 89,400 / 62,800

Answer 1

Requirement: 1 Days sales Uncollected Denominator Days Sales Uncollected Years Numerator X Days Days Sales Unco llected 45.5 days 40.5 days / Net Sales Accounts Receivable 365 X 2017 89400 717318 X 365 566053 2016 62800 X 365 Requirement: 2 Accounts Recievable Turn over ratio / Denominator Numerator Account Recievable ratio Year Net Credit sales Average Account Recievable Account Recievable ratio 717318 76100 9.4 times 2017 = / 10.0 times 2016 566053 56450 I

Requirement: 3 Inventory turn over ratio Inventory Turn over ratio Inventory Turn over ratio Denominator Year Numerator Cost of goods sold Average Inventory 437564 2017 98500 4.4 times 5.3 times 70000 2016 367934 Requirement: 4 Days Sales in inventory Days Sales in inventory Days Sales in inventory 95.9 days 81.3 days Numerator Denominator Year Days Ending Inventory Cost of goods sold X 365 2017 115000 437564 X 365 2016 367934 82000 X 365