Question

ORIOLE COMPANY Balance Sheets December 31 Assets 2022 2021 $ 69,000 $ 65,000 Cash Debt investments (short-term) 55,000 40,000 Accounts receivable 109,000 89,000 168,000 Inventory 239,000 23,000 26,000 Prepaid expenses Land 129,000 129,000 Building and equipment (net) 264,000 186,000 $888,000 $703,000 Total assets Liabilities and Stockholders' Equity $169,000 $109,000 Notes payable Accounts payable 66,000 52,000 42,000 42,000 Accrued liabilities Bonds payable, due 2025 251,000 170,000 Common stock, $10 par 204,000 204,000 156,000 Retained earnings 126,000 $888,000 $703,000 Total liabilities and stockholders' equity

Answer 1

1) Inventory turnover ratio =    Total Turnover (Revenue)

                                                           Average inventory

For the year 2021               =         $ 800,000       =     5.65 Times

                                                          $ 141,500

For the year 2022                =        $ 902,000        =     4.43 Times    

                                                             $203,500

Note:   Average inventory = Inventory at the beginning + Inventory at the end

                                                                                           2

             For the year 2021=     $ 115000 + $ 168000     =        $ 141,500

                                                                        2

             For the year 2022=    $ 168000 + $ 239000      =        $ 203,500

                                                                       2

2) Accounts Receivable Turnover Ratio =           Total Turnover (Revenue)

                                                                                Average Accounts Receivable (AR)

For the year 2021               =         $ 800,000       =     8.99 Times

                                                             $ 89,000

For the year 2022                =        $ 902,000        =     9.11 Times    

                                                             $ 99,000

Note:   Average AR = AR at the beginning of the year + AR at the end of the year

                                                                                           2

             For the year 2021=     $ 89000 + $ 89000     =        $ 89,000

                                                                     2

             For the year 2022=    $ 89000 + $ 109,000      =     $ 99,000

                                                                     2

                               

Liquidity	Year 2021	Year 2022	% Change
Current Ratio	1.91 : 1	1.78 : 1	-6%
Accounts Receivable Turnover (Refer working note 2 above)	8.99 Times	9.11 times	1%
Inventory Turnover (refer working note 1 above)	5.65 Times	4.43 Times	-21%