Question

Ending total assets are $1,500,000, inventory turnover is 6.0 times, net sales are $8,000,000 and the asset turnover is 4.0 times. Given that gross sales are $9,000,000, what is the beginning total asset balance

Answer 1

$2,500,000 = Beginning total assets

Step-by-step explanation:

Given that,

Ending total assets = $1,500,000

Inventory turnover = 6.0 times

Net sales = $8,000,000

Asset turnover = 4.0 times

Gross sales = $9,000,000

Asset turnover ratio = (Net sales ÷ Average total assets)

4 = ($8,000,000 ÷ Average total assets)

Average total assets = ($8,000,000 ÷ 4)

= $2,000,000

Average total assets = (Beginning total assets + Ending total assets) ÷ 2

$2,000,000 = (Beginning total assets + $1,500,000) ÷ 2

$4,000,000 = Beginning total assets + $1,500,000

$4,000,000 - $1,500,000 = Beginning total assets

$2,500,000 = Beginning total assets

Answer 2

$2,500,000

Step-by-step explanation:

Data provided

Ending assets = $1,500,000

Inventory turnover = 6.0 times

Net sales = $8,000,000

The computation of beginning total asset balance is shown below:-

Average total assets = $8,000,000 ÷ 4

= $2,000,000

Total assets = $2,000,000 × 2

= $4,000,000

Beginning assets = Total assets - Ending assets

= $4,000,000 - 1,500,000

= $2,500,000

Therefore we applied the above formula