Question

Canadian Bacon Inc. financial statements are presented in the table below.

            Based on the information in the table, and using a 365-day year, calculate operating cycle.

Balance Sheet December 31, 2014

Cash and marketable securities	$132,000	Accounts payable	$399,000
Accounts receivable	$311,000	Notes payable	$98,500
Inventories	$512,000	Accrued expenses	$89,300
Prepaid expenses	$11,300	Total current liabilities	$586,800
Total current assets	$966,300	Long-term debt	$799,400
Gross fixed assets	$2,104,000	Par value and paid-in-capital	$298,000
Less: accumulated depreciation	$398,000	Retained Earnings	$988,100
Net fixed assets	$1,706,000	Common Equity	1,286,100
Total assets	$2,672,300	Total liabilities and owner’s equity	$2,672,300

Income Statement, Year of 2014

Net sales (all credit)	$4,276,600.00
Less: Cost of goods sold	$3,292,982.00
Selling and administrative expenses	$349,000.00
Depreciation expense	$148,000.00
EBIT	$486,618.00
Interest expense	$49,600.00
Earnings before taxes	$437,018.00
Income taxes	$174,807.20
Net income	$262,210.80

Answer 1

Calculate the operating cycle as follows: 1 Particulars 2 Inventories 3 Accounts receivables 4 Cost of goods sold 5 Net sales Amount $512,000.00 $311,000.00 $3,292.982.00 $4,276,600.00 7 Days inventory outstanding 8 Days sales outstanding 56.7510 26.5433 10 Operating cycle 83.29 Days Formulas: 1 Particulars 2 Inventories 3 Accounts receivables 4 Cost of goods sold 5 Net sales Amount 512000 311000 3292982 4276600 7 Days inventory outstanding 8 Days sales outstanding =(B2*365) B4 =(B3*365) B5 10 Operating cycle =B7+BS Days