Question

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

       Based on the information in the table, and using cost of goods sold and a 365-day year, calculate Days of Sales in Inventory (using cost of goods sold).

Round the answers to two decimal places

Balance Sheet December 31, 2012

Cash and marketable securities	$198,000	Accounts payable	$288,000
Accounts receivable	$469,000	Notes payable	$65,000
Inventories	$577,000	Accrued expenses	$84,000
Prepaid expenses	$15,700	Total current liabilities	$437,000
Total current assets	$1,259,700	Long-term debt	$237,000
Gross fixed assets	$1,954,000	Par value and paid-in-capital	$199,000
Less: accumulated depreciation	$476,000	Retained Earnings	$1,864,700
Net fixed assets	$1,478,000	Common Equity	2,063,700
Total assets	$2,737,700	Total liabilities and owner’s equity	$2,737,700

Income Statement, Year of 2012

Net sales (all credit)	$7,546,600.00
Less: Cost of goods sold	$6,112,746.00
Selling and administrative expenses	$349,000.00
Depreciation expense	$145,000.00
EBIT	$939,854.00
Interest expense	$49,500.00
Earnings before taxes	$890,354.00
Income taxes	$356,141.60
Net income	$534,212.40

Answer 1

Cost of goods sold is $6,112,746.00 from the income statement.

The question states us to take 365 days per year,

Average day's COGS = Cost of goods sold / 365 days = 6,112,746/365 = 16747.2493151

inventories from balance sheet are $577,000

Thus, days of sale in inventories is Inventories / average day's COGS

=577000/16747.2493151

=34.45 days