Question

The following selected accounts were taken from the financial records of Los Olivos Distributors at December 31, 2019. All accounts have normal balances.Cash $ 33,340 Accounts receivable 47,700 Note receivable, due 2020 9,500 Merchandise inventory 35,700 Prepaid insurance 2,350 Supplies 1,410 Equipment 43,500 Accumulated depreciation, equipment 23,500 Note payable to bank, due 2020 35,000 Accounts payable 13,050 Interest payable 350 Sales 535,000 Sales discounts 3,200 Cost of goods sold 348,540 Accounts Receivable at December 31, 2018, was $52,550. Merchandise inventory at December 31, 2018, was $58,500. Based on the account balances above, calculate the following:The gross profit percentage.Working capital.The current ratio.The inventory turnover.The accounts receivable turnover. All sales were on credit.

Answer 1

See explainations below

Step-by-step explanation:

1. Gross profit margin (percentage) = Gross profit/Net sales

= (Net sales - Cost of goods sold)/Net sales

= (Gross sales - Sales discount - Cost of goods sold)/(Gross sales - Sales discount)

= (535,000 - 3,200 - 348,540)/(535,000 - 3,200) = 34.5%.

2. Working capital = Current asset - Current liabilities

= (33,340 + 47,700 + 9,500 + 35,700 + 2,350) - (35,000 + 13,050 + 350) = 80,190

3. Current ratio = Current asset/Current liabilities

= (33,340 + 47,700 + 9,500 + 35,700 + 2,350)/(35,000 + 13,050 + 350)

= 7.6

4. Inventory turnover = Cost of goods sold/Average inventories

= 348,540/[(35,700 + 58,500)/2] = 7.4

5. Accounts receivable turnover = Net credit sales/Average receivables

= (535,000 - 3,200)/[(47,700 + 52,550)/2] = 10.6