Homework Answers
Given, Duration of operating cycle = 105 days
We know the equation for Duration of operating cycle = ( Raw material holding period + work-in-progress holding period + Fixed goods holding period + Debtors collection period) - Creditors payment period.
1. Raw material holding period (RMHP) = Average stock of Raw-material * 360 days/ Raw materials consumed
= 35,00,000*360/120,00,000 = 105 days
2.Working progress holding period (WIPHP) = Average stock of work-in-progress*360/Cost of production
= 10,00,000*360/210,00,000 = 17.143 daysdays
3. Finished goods holding period (FGHP) = Average stock of finished goods*360/Cost of sales
= 30,00,000*360/240,00,000 = 45 days
4. Debtor's collection period (DCP) = Average accounts receivable*360/Credit sales for the year
= average accounts receivable = ( opening accounts receivable + closing accounts receivable)/2 = be "x"
= x*360/300,00,000
= 360x/300,00,000
5. Creditors payment period = 75 days
On substitution of all these 5 values in the equation,
105 = (105 + 17.143 + 45 + 360x/300,00,000 ) - 75
On solving x = 10,71,416.667
Now if we solve x,
(15,00,000+ closing balance of accounts receivable)/2 = 10,71,416.667
Then closing balance of accounts receivable = 6,42,832.
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Trial Balance
Details/Accounts
Dr $
Cr $
Purchases of direct raw materials
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you the Financial Accountant:
Trial Balance
Details/Accounts
Dr $
Cr $
Purchases of direct raw materials
24,200,000
Stock of direct raw materials 1 January 2018
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Wages paid to manufacture goods
12,000,000
Insurance
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Electricity
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Accounts payable
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Discounts
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Return of direct raw materials
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