Sales/New Inventory Ratio X = $10‚000‚000 / 5 = $2‚000‚000 in New Inventory $5‚000‚000 – 2‚000‚000 = $3‚000‚000 The company will free up $3 million in free cash flow. 16-2 Receivables Investment Receivables = (DSO) * (Average Daily Sales) X = (17 days) ($3‚500) X = $59‚500 is the average accounts receivable 16-3 Cost of Trade Credit Nominal Cost of Trade Credit = (Discount %) / (100-Discount %) x (365) / (Days Credit is outstanding – Discount Period) X = 3 / (100 - 3) * 365 / (30-15)
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lower the price of their product. All else equal‚ this will likely lower their profit margin and decrease total asset turnover. 11. T F Tech firms tend to have higher market-to-book ratios than brick-and-mortar firms. 12. T F If a firm uses accounts payable to purchase a new fixed asset‚ this will make the current ratio move away from one. 13. T F Manufacturing firms will likely have smaller differences between their Times Interest Earned and Cash Coverage Ratios than consulting firms. 14
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ACC121 FINAL EXAM – Problems (130 points total) First 10 problems @ 11 points each; 1 problem @ 20 points Student name _Katerina Worley______________________ Date _6/23/15____________________ 1. Given the following information about purchases and sales during the year‚ compute the cost to be assigned to ending inventory under each of three methods: (a) average-cost‚ (b) FIFO‚ and (c) LIFO. (Show your work.) Assume that a periodic inventory system is used. Jan. 1 Beginning inventory 225 items
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(A) Accrued tax payments (B) Line of credit (C) Transaction loans (D) Factored accounts receivable __________7. The primary advantage that factoring accounts receivable provides is: (A) the flexibility it gives to the borrower (B) that the financial institution bears the risk of collection (C) the low cost as compared with other sources of short-term financing (D) that the financial institution services the accounts. __________8. The cost of trade credit varies with the: (A) size of the cash discount
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or one creditor in a single account. (This is one of the advantages of using subsidiary ledgers ("Advantages of Subsidiary Ledgers").) | | | | subsidiary ledgers free the general ledger of excessive details. (This is one of the advantages of using subsidiary ledgers ("Advantages of Subsidiary Ledgers").) | | | | subsidiary ledgers eliminate errors in individual accounts. (Correct! Subsidiary ledgers help locate‚ not eliminate‚ errors in individual accounts ("Advantages of Subsidiary
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all instances? Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation. 2) What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts. 3) The balance sheet is a financial snap shot of a company at a particular point in time. The balance sheet lists the assets‚ liabilities‚ and equity
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Inc. on July 1‚ 2012. During July the following transactions were completed. July 1 Issued 12‚000 shares of common stock for $12‚000 cash. July 1 Purchased used truck for $8‚000‚ paying $2‚000 cash and the balance on account. July 3 Purchased cleaning supplies for $900 on account. July 5 Paid $1‚800 cash on 1-year insurance policy effective July 1. July 12 Billed customers $3‚700 for cleaning services. July 18 Paid $1‚000 cash on amount owed on truck and $500 on amount owed on cleaning supplies
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customer and tighten up accounts receivable in both times I did the simulation. I chose to take on a new customer because SNC needed the exposure to become known as it is starting to get widespread exposure. The results of this acquisition were that it increased the sales significantly but also left us with higher receivable an inventory balances. (Harvard SNC Synopsis) The results of tightening up the accounts receivable were that sales have declined but the receivables improved which freed up cash
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cash and $4‚000 on account. 3. The company purchased supplies for $750 cash. 4. The company receives $4‚100 in cash revenue and $5‚400 in accounts receivable. 5. The company paid $1‚500 cash for accounts payable. 6. The company paid a $2‚000 dividend. 7. The company paid $800 cash for rent. 8. The company received a payment for accounts receivable. 9. The company paid its employees’ salaries in the amount of $3‚000. 10. The company paid their utility expense on account. Determine how
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Current and Noncurrent Assets Current Assets A current asset is an asset such as cash‚ receivables‚ or inventory that can be converted into cash‚ consumed‚ or sold within a year’s time or a normal operating business cycle. These assets are listed on a company’s balance sheet as cash‚ unexpired insurance‚ accounts receivable‚ supplies‚ etc. and are expect to leave the balance sheet in the near future. Current assets get used up quickly and are used to pay current liabilities. Current assets are
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