Problem 1: Income statements for LaRue Co. show the following:
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2011
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2010
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2009
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Sales (net) .....................
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$500,000
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$400,000
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$350,000
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|
Cost of goods sold:
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|
|
|
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Beginning inventory .............
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110,000
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90,000
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20,000
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Purchases .......................
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420,000
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330,000
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370,000
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|
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$530,000
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$420,000
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$390,000
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Ending inventory ................
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170,000
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110,000
|
90,000
|
|
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360,000
|
310,000
|
300,000
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Gross profit ....................
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$140,000
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$ 90,000
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$ 50,000
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From the data presented, calculate the following ratios for 2011 and 2010:
(1) Inventory turnover rate.
(2) Number of days' sales in inventories.
(3) Gross profit margin on sales.
Problem 2: The following are comparative data for Gates Company for the three-year period 2009-2011:
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Income Statement Data
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2011
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2010
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2009
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Net sales (80% are on credit each period) .........................
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$900,000
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$720,000
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$840,000
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|
Net purchases ...................
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480,000
|
390,000
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330,000
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|
|
|
|
|
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Balance Sheet Data
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Accounts receivable, December 31
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$150,000
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$132,000
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$126,000
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Compute the following measurements for 2011 and 2010:
(1) The receivables turnover rate.
(2) The average collection period for accounts receivable.