Question

the balance sheets of davidson corporation reported net fixed assets of $320,000 at the end of 2021. the fixed-asset turnover ratio for 2021 was 4.0, and sales for the year totaled $1,480,000. net fixed assets at the end of 2020 were:

Answer 1

The net fixed assets of Davidson Corporation at the end of 2020 were $370,000, calculated using the fixed-asset turnover ratio and sales for 2021.

Step-by-step explanation:

To calculate the net fixed assets of Davidson Corporation at the end of 2020, we can use the fixed-asset turnover ratio. This ratio is computed by dividing the sales by the net fixed assets.

Given that the fixed-asset turnover ratio for 2021 is 4.0 and the sales for the year were $1,480,000, we can work backward to find the net fixed assets at the end of 2020.

The formula for the fixed-asset turnover ratio is:

Fixed-Asset Turnover Ratio = Sales / Net Fixed Assets

We're given:

• Fixed-Asset Turnover Ratio for 2021: 4.0
• Sales for 2021: $1,480,000
• Net Fixed Assets at the end of 2021: $320,000

Using the turnover ratio formula:

4.0 = $1,480,000 / Net Fixed Assets at the end of 2020

To find the net fixed assets at the end of 2020, we rearrange the formula and solve for the net fixed assets:

Net Fixed Assets at the end of 2020 = $1,480,000 / 4.0

Therefore:

Net Fixed Assets at the end of 2020 = $370,000