Question

Simon Company’s year-end balance sheets follow.

At December 31	2017			2016			2015
Assets
Cash	$	32,096		$	37,517		$	38,306
Accounts receivable, net		89,700			62,100			54,700
Merchandise inventory		115,000			83,500			54,000
Prepaid expenses		10,336			9,848			4,256
Plant assets, net		291,476			271,352			231,838
Total assets	$	538,608		$	464,317		$	383,100
Liabilities and Equity
Accounts payable	$	135,455		$	79,254		$	51,075
Long-term notes payable secured by mortgages on plant assets		102,271			107,861			85,512
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		138,382			114,702			84,013
Total liabilities and equity	$	538,608		$	464,317		$	383,100

The company’s income statements for the years ended December 31, 2017 and 2016, follow. Assume that all sales are on credit:

For Year Ended December 31	2017						2016
Sales				$	700,190					$	552,537
Cost of goods sold	$	427,116					$	359,149
Other operating expenses		217,059						139,792
Interest expense		11,903						12,708
Income taxes		9,102						8,288
Total costs and expenses					665,180						519,937
Net income				$	35,010					$	32,600
Earnings per share				$	2.15					$	2.01

(1) Compute days' sales uncollected.

Days' Sales Uncollected
	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days' Sales Uncollected
		/		x		=	Days' Sales Uncollected
2017:		/		x		=	0	days
2016:		/		x		=	0	days

2Compute accounts receivable turnover

Accounts Receivable Turnover
	Choose Numerator:	/	Choose Denominator:	=	Accounts Receivable Turnover
		/		=	Accounts receivable turnover
2017:		/		=		times
2016:		/		=		times

(3) Compute inventory turnover.

Inventory Turnover
	Choose Numerator:	/	Choose Denominator:	=	Inventory Turnover
		/		=	Inventory turnover
2017:		/		=		times
2016:		/		=		times

4 Compute days' sales in inventory.

Days’ Sales In Inventory
	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days’ Sales In Inventory
		/		x		=	Days’ sales in inventory
2017:		/		x		=	0	days
2016:		/		x		=	0	days

Answer 1

1
Days' Sales Uncollected
	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days' Sales Uncollected
	Accounts receivable	/	Net sales	x	365	=	Days' Sales Uncollected
2017	$89,700	/	$700,190	x	365	=	46.8	days
2016	$62,100	/	$552,537	x	365	=	41.0	days
2
Accounts Receivable Turnover
	Choose Numerator:	/	Choose Denominator:	=	Accounts Receivable Turnover
	Net sales	/	Average accounts receivable, net	=	Accounts receivable turnover
2017	$700,190	/	$75,900	=	9.2	times
2016	$552,537	/	$58,400	=	9.5	times
3
Inventory Turnover
	Choose Numerator:	/	Choose Denominator:	=	Inventory Turnover
	Cost of goods sold	/	Average inventory	=	Inventory turnover
2017	$427,116	/	$99,250	=	4.3	times
2016	$359,149	/	$68,750	=	5.2	times
4
Days’ Sales In Inventory
	Choose Numerator:	/	Choose Denominator:	x	Days	=	Days’ Sales In Inventory
	Ending inventory	/	Cost of goods sold	x	365	=	Days’ sales in inventory
2017	$115,000	/	$427,116	x	365	=	98.3	days
2016	$83,500	/	$359,149	x	365	=	84.9	days