Answer:
Annual sale is $2,282,728.80 and ACP is 44.87 days
Explanation:
Since the annual sales are not given, so first we have to compute the current liabilities amount, then inventory amount, after that, only the sales amount could be found
So, the current liabilities = Current assets ÷ current ratio
= $775,000 ÷ 2.75
= $281,818
Now the quick ratio = (Current assets - inventory) ÷ current liabilities
1.4 times = ($775,000 - inventory) ÷ $281,818
$394545.20 = $775,000 - inventory
So, inventory = $380,454.80
Now, the inventory turnover equals to
Inventory turnover ratio = (Turnover ÷ average inventory)
6 times = Annual sales ÷ 380454.80
So, annual sales = $2,282,728.80
The computation of the ACP is shown below:
= (Account receivable ÷ credit sales) × 360 days
Since account receivables is not given so first, we have to calculate it which equals to
= Current assets - cash - inventory
= $775000 - $110,000 - $380,454.80
= $284545.20
Now put these values to the above formula
So, the value would equal to
= ( $284545.20 ÷ $2,282,728.80) × 360 days
= 44.87 days
