1 answer

Canadian Bacon Inc. financial statements are presented in the table below.            Based on the information in...

Question:

Canadian Bacon Inc. financial statements are presented in the table below.

           Based on the information in the table, and using a 365-day year, calculate the average collection period (also called Days of Sales in Receivables or Number of Days of Credit).

Round the answers to two decimal places

Balance Sheet December 31, 2011

Cash and marketable securities $143,000 Accounts payable $278,000
Accounts receivable $354,000 Notes payable $87,000
Inventories $672,000 Accrued expenses $65,000
Prepaid expenses $12,500 Total current liabilities $430,000
Total current assets $1,181,500 Long-term debt $284,000
Gross fixed assets $1,675,000 Par value and paid-in-capital $228,000
Less: accumulated depreciation $500,000 Retained Earnings $1,414,500
Net fixed assets $1,175,000 Common Equity 1,642,500
Total assets $2,356,500 Total liabilities and owner’s equity $2,356,500

Income Statement Year of 2011

Net sales (all credit) $3,136,600.00
Less: Cost of goods sold $2,195,620.00
Selling and administrative expenses $345,000.00
Depreciation expense $146,000.00
EBIT $449,980.00
Interest expense $45,300.00
Earnings before taxes $404,680.00
Income taxes $161,872.00
Net income $242,808.00

Answers

Calculate the average collection period as follows: 1 Particulars 2 Net sales 3 Accounts receivables 4 Average collection period Amount 3136600 354000 41.19 Therefore, the average collection period is 41.19 Formulas: 1 Particulars 2 Net sales 3 Accounts receivables 4 Average collection period (365 B3)/B2 Amount 3136600 354000

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