Natcher Corporation’s accounts receivable at the end of Year 2 was $131,000 and its accounts receivable...
Natcher Corporation’s accounts receivable at the end of Year 2 was $131,000 and its accounts receivable at the end of Year 1 was $134,000. The company’s inventory at the end of Year 2 was $132,000 and its inventory at the end of Year 1 was $124,000. Sales, all on account, amounted to $1,386,000 in Year 2. Cost of goods sold amounted to $803,000 in Year 2. The company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations to 1 decimal place.) Multiple Choice 45.3 days 68.4 days 64.2 days 92.7 days
Homework Answers
Answer : D = 92.7 days.
>> Average Inventory = ( $ 132,000 + $ 124,000 ) / 2
>> Average Inventory = $ 128,000.
>> Inventory Period = ( 365 * Average inventory ) / Cost of Goods sold
>> Inventory Period = ( 360 * $ 128,000 ) / $ 803,000
>> Inventory Period = 57.4 Days.
>> Average Accounts Receivable = ( $ 131,000 + $ 134,000 ) / 2
>> Average Accounts Receivable = $ 132,500.
>> Accounts receivable period = ( 365 * Average accounts receivable ) / Credit Sales
>> Accounts receivable period = ( 360 * $ 132,500 ) / $ 1,386,000
>> Accounts receivable period = 34.4 Days.
>> Operating cycle period = Inventory period + Accounts receivable period
>> Operating cycle period = 57.4 + 34.4
>> Operating cycle period = 91.8 Days
>> Operating cycle period = 92.7 days ( approx )
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Natcher Corporation’s accounts receivable at the end of Year 2
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