Question

Tungsten Company, Inc., sells heavy construction equipment. There are 11,500 shares of capital stock outstanding. The annual fiscal period ends on December 31. The following condensed trial balance was taken from the general ledger on December 31, Current Year:

Account Titles	Debit		Credit
Cash	$	34,800
Accounts receivable (net)		15,100
Inventory, ending		53,400
Operational assets		41,000
Accumulated depreciation			$	18,100
Liabilities				24,300
Capital stock				73,900
Retained earnings, January 1, Current Year				16,480
Sales revenue				147,800
Sales returns and allowances		7,300
Cost of goods sold		80,000
Selling expense		15,700
Administrative expense		16,200
Bad debt expense		2,300
Sales discounts		7,100
Income tax expense		7,680
Totals	$	280,580	$	280,580

Required:

1. Beginning with the amount for net sales, prepare an income statement (showing both gross profit and income from operations). Treat sales discounts and sales returns and allowances as a contra-revenue. (Round "Earnings per share" to 2 decimal places.)

2. The beginning balance in Accounts Receivable (net) was $17,800. Compute the receivables turnover ratio.

Answer 1

1. INCOME STATEMENT

2. Receivable turnover ratio=net credit sales/Average account receivables

Average account receivables=(17800+15100)/2=$16450

Receivable turnover ratio= 133400/16450=8.11