Question

Lendell Company has these comparative balance sheet data: Lendell Company Balance Sheets December 31 2020 2019 Cash $ 15,000 $ 30,000 Accounts receivable (net) 71,000 60,000 Inventory 61,000 50,000 Plant assets (net) 197,000 175,000 View Policies $344,000 Accounts payable $50,000 $59,200 Mortgage payable (15%) 108,000 108,000 Common stock, $10 par 138,500 124,500 Retained earnings 47,500 23,300 $344,000 $315,000 Additional information for 2020: 1. Net income was $25,700. 2. Sales on account were $412,500. Sales returns and allowances amounted to $19,500. 3. Cost of goods sold was $199,800. 4. Net cash provided by operating activities was $45,600. 5. Capital expenditures were $23,800, and cash dividends were $10,100.

Answer 1

Answer- a)-Current Ratio=Current Assets/ Current Liabilities

= ($15000+$71000+$61000)/$50000

= $147000/$50000

= 2.94 times

b)-Accounts receivable turnover ratio = Net credit sales/Average accounts receivable

=($412500-$19500)/($60000+$71000)/2

= $393000/$65500

= 6 times

c)- Average collection period = 365 days/ Accounts receivable turnover ratio

= 365 days/6.0

= 60.8 days

d)- Answer-Inventory turnover ratio = Cost of goods sold/Average inventory

= $199800/($50000+$61000)/2

= $199800/$55500

= 3.6 times

e)- Average days to sell in inventory =365 days/ Inventory turnover ratio

= 365/3.6 times

= 101.4 days

f)-Free cash flow = Net cash provided by operating activities- Capital expenditure-Cash dividends paid

= $45600-$23800-$10100

= $11700