Question

Burdick Corporation has provided the following financial data from its balance sheet: Accounts receivable, net Inventory Total assets Total stockholders' equity Year 2 $ 266,000 $ 162,000 $1,415,000 $ 991,000 Year 1 $ 250,000 $ 190,000 $1,390,000 $ 970,000 Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000. The company's operating cycle for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice 10.4 days o 72.2 days o 141.3 days o 79.5 days o

Answer 1

Answer : 141.3 days Working Notes: Operating Cycle = Inventory Period + Accounts Receivables Period Inventory period = Average Inventory / Cost of goods Sold*365 days Average Inventory = (Beginning Inventory + Ending Inventory)/2 = ($190,000+$162.000)/2 = $176,000 Inventory period = $176,000/$860,000*365 = 74.6 Days Accounts Receivables Period = Average Accounts Receivables / Sales *365 Days Average Accounts Receivables = (Beginning accounts receivables + ending accounts receivables)/2 = ($250,000+$266,000)/2 = $258,000 Accounts Receivables Period=$258.000/$1,410,000*365 = 66.7 Days Operating Cycle = 74.6 Days +66.7 Days = 141.3 Days