Question

Exercise 18-09 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 60,000 50,000 Plant assets (net) 196,000 178,000 $342,000 $318,000 Accounts payable $50,000 $59,500 Mortgage payable (15%) 107,500 107,500 Common stock, $10 par 144,000 124,500 Retained earnings 40,500 26,500 $342,000 $318,000 Additional information for 2020: 1. 2. 3. 4. 5. Net income was $25,100. Sales on account were $407,350. Sales returns and allowances amounted to $20,900. Cost of goods sold was $198,000. Net cash provided by operating activities was $44,500. Capital expenditures were $26,000, and cash dividends were $9,000.

Answer 1

Current ratio = ( current assets / current liabilities Current Assets 146000 Current Liabilities 50000 Current Ratio 2.92 :: 1 Accounts receivable turnover = Cost of Goods sold / Average receivables Cost of goods sold 198000 Beginning receivable 60000 Ending receivable 71000 Avg receivables 65500 A/c's receivable turnover = 3.0 Avg collection period = 365 / Accounts receivable turnover Avg collection period = 120.7 Days

Inventory turnover = Cost of Goods sold / Average inventory Cost of goods sold 198000 Beginning inventory 50000 Ending inventory 60000 Avg inventory 55000 Inventory turnover = 3.6 Days in inventory = 365 / Inventory turnover Days in inventory = 101.4 Days Free cash = Net cash flows from Operating Activity - capital expenditure Net CF's from Operating activity 44500 Capital expenditure 26000 Free cash ================== 18500