Question

Sales for the year for Victor Company were $1,200,000, 70 percent of which were on credit. The average gross profit rate was 45 percent on sales. Account balances follow: Beginning Ending Accounts receivable (net) $ 62,000 $ 76,000 Inventory 77,000 41,000 Required: 1. Compute the turnover for the accounts receivable and inventory. (Round your answers to 1 decimal place.) 2. Compute the average age of receivables, and the average days' supply of inventory. (Use 365 days in a year. Round your intermediate calculations and final answers to 1 decimal place.)

Answer 1

Required: 1. Compute the turnover for the accounts receivable and inventory. (Round your answers to 1 decimal place.)

Account receivable turnover = (1200000*70%)/69000 = 12.2 Times

Inventory turnover = (1200000*55%)/59000 = 11.2 Times

2. Compute the average age of receivables, and the average days' supply of inventory. (Use 365 days in a year. Round your intermediate calculations and final answers to 1 decimal place.)

Average age of receivables = 365/12.2 = 29.9 Days

Average days of supply of inventory = 365/11.2 = 32.6 Days