Answered: a. Calculate and interprete the…

Business

Accounting

a. Calculate and interprete the following ratios Receivables days Payables days Inventory days

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter6: Accounting For Merchandising Businesses

Section: Chapter Questions

Problem 36E: The following data were extracted from the accounting records of Harkins Company for the year ended...

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Question

A
Balance Sheet of Chanda as at 31/12/2019
7 Particulars
B Assets:
e Current Assets:
O Cash
Amount in K
Amount in K
3200
Trade Receivalbes
74480
Inventory at 31/12/19
3 Prepaid Expenses
4 Fixed Assets:
5 Building (Note 1)
5 Plant (Note 2)
7 Total Assets
84000
600
162280
196400
63000
259400
421680
Liabilities and Capital:
Current Liabilities:
Trade Payables
72000
1600
2 Wages and Salaries payable
3 Interest Payable
4 Non Current Liabilities:
1000
74600
5 10% Loan
20000
20000
5 Total Liabilities
94600
7 Capital:
3 Capital at 01/01/2019
9 Less: Drawings
ɔ Add: Net Profit
1 Capital at 31/12/2019
Total liabilities and Capital
282600
-48000
92480
327080
421680
|
Required:
a. Calculate and interprete the following ratios
• Receivables days
• Payables days
• Inventory days
• Asset turnover
• Gearing Ratio
• Gross Profit Margin (GPM)
• Net Profit Margin (NPM)
Return on Capital Employed (ROCE)
Current ratio
Acid test ratio

Statement of Profit or Loss of Chanda as at 31/12/2019
Particulars
Amount in K
Amount in K
808800
-36000
-4400
Sales
Less: Discount Allowed
Less: Return Inwards
768400
Less: Cost of Goods Sold:
Inventory at 01/01/2019
100000
Add: Purchases
500000
Less: Return Outwards
Less: Discount Received
-30000
-9600
Less: Closing Inventories
i Gross Profit
Less: Selling and Admin. Expense:
Wages and salaries
Bad debts
Other Expense
Interest expense on Loan
Depreciation Expense
On Building
On Plant
-84000
476400
292000
119200
9720
45000
1000
3600
21000
199520
Net Income
92480
-

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