Question

Simon Company’s year-end balance sheets follow.

Answer 1

Answer and Explanation:

The computations are given below:

As we know that

(1) The Account receivable turnover ratio is

= Net sales ÷ average account receivable

So

For 2015, it is

= $673,500 ÷ ($89,500 + $62,500) ÷ 2

= 8.86 times

For 2014, it is

= $532,000 ÷ ($62,500+$50,200) ÷ 2

= 9.44 times

(2) The inventory turnover ratio is

= Cost of goods sold ÷ average inventory

For 2015

= $411,225 ÷ ($112,500 + $82,500) ÷ 2

= 4.22 times

For 2014

= $345,500 ÷ ($82,500 + $54,000) ÷

= 5.06 times

(3) The days sales in inventory is

= Ending inventory ÷ cost of goods sold × 365

For 2015, it is

= $112,500 ÷ $411,225 × 365

= 99.85 days

For 2014, it is  

= $82,500 ÷ $345,500 × 365

= 87.16 days