Question

Financial statement data for the years ended December 31 for Parker Corporation are as follows: Current...

Financial statement data for the years ended December 31 for Parker Corporation are as follows:

Current Year Prior Year
Net Sales $2,595,600 $2,409,498
Fixed assets (net):
Beginning of the year $901,070 $820,000
End of the year 829,330 901,070

a. Determine the fixed asset turnover for the current and prior years. Round your answers to one decimal place.

Current Year:
Prior Year:

b. Does the change in fixed asset turnover from the prior year to the current year indicate a favorable or unfavorable trend?

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Answer #1

Firstly we need to calculate the Average Fixed assets for both the periods.

Average Fixed Assets = (Fixed Assets at the beginning + Fixed assets at the ending period)/2

Current Year = ($901070+829330)/2

= 1730400/2

=$865200

Prior Year = $820000+901070

= 1721070/2

= $860535

Fixed Assets Turnover = Sales/Average Fixed Assets

Current year = $2595600/865200

= 3

Prior Year = $2409498/860535

= 2.8

b) There is an increase in the Fixed asset turnover which indicates an increase in efficiency of using fixed assets to generate sales.

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