Question

Exercise 17-8 Liquidity analysis and interpretation LO P3 [The following information applies to the questions displayed below.j Simon Company's year-end balance sheets follovw At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets 2017 $ 31,800 35,625 $37,800 50,200 54,000 5,000 278, 500 255,000 230,500 $523,000 $445,000 377,500 89,500 62,500 112,500 82,500 9,375 10,700 Liabilities and Equity Accounts payable Long-term notes payable secured by $129,900 75,250 $ 51,250 mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 83,500 163, 50 163,500163,500 79,250 $523,000 $445,000 377,500 98,500 101, 500 131,100 104,750 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 2017 2016 $673,500 $532,000 Cost of goods sold $411,225 209,550 12,100 9525 $345,50 Other operating expenses Interest expense Income taxes Total costs and expenses Net income 134,980 13, 300 8.845 642,400e 31,100 $ 1.90 502,625 $ 29,375 $1.80 Earnings per share

Answer 1

Requirement: 1 Days sales Uncollected Years Numerator Davs Sales Uncollected Denominator Net Sale:s 673500 532000 Da 365 Average Accounts Receivable Days Sales Uncollected claaf 2017 X 365 41.19 365 38.66days 2016 56350

Requirement: 2 Accounts Recievable Turn over ratio Account Recievable turn over ratio Account Recievable turn over ratio Years Numerator Net sales 673500 532000 Denominator Average Recievable 76000 56350 2017 2016 8.86 Times 9.44 Times Average Receivable Beginning Receivable Ending Receivable Average Receivable 76000 56350 Years 2017 2016 62,500 50,200 89,500 62,500 2 2 2

Requirement: 3 Inventory turn over ratio Numerator Denominator Inventory Turn over ratio Inventory Turn over ratio Cost of goods sold 4,11,225 3,45,500 Average Invento 2017 2016 97,500 68,250 4.22 Times 5.06 Times Average Invento Beginning Inventory+ +Ending Invento Average Invento 2017 2016 82,500 54,000 1,12,500 82,500 97500 68250 Requirement:4 Day's Sales In Invento Average Days sales Uncollected Average Days sales Uncollected Numerator Denominator X Days Average Invento Cost of goods sold | X | 365 |= 2017 2016 97,500 68,250 4,11,225 3,45,500 X365 X365 86.54 da 72.10 da

Note: Answers are rounded to Two Decimals