The financial statements for Wiley Ltd are presented below: Statement of profit or loss and other comprehensive income for Wiley Ltd for the year ending 30 June 2019 $ $ Sales (credit) 250 000 Cost of sales – Inventory—01 July 2018 (25 000) – Purchases (152 500) – Inventory—30 June 2019 27 500 (150 000) Gross profit 100 000 Selling and administrative expenses (20 000) Depreciation (40 000) Profit before tax 40 000 Income tax expense (20 per cent) (10 000) Profit after tax 30 000 Other comprehensive income – Total comprehensive income 30 000 Statement of financial position for Wiley Ltd as of 30 June 2019 ($) Cash 34000 Accounts receivable 46000 Inventory (cost) 27500 Plant and equipment 125000 less Accumulated depreciation (30000) Land 50000 Total assets 252500 Share capital 150000 Retained earnings 30 000 Current liabilities Accounts payable Dividends payable 12 500 10 000 Non-current liabilities Long-term bonds 50 000 Total shareholders’ equity and liabilities 252500 Required: Calculate the operating cycle for year 2019 using closing Accounts receivable. Calculate the Cash (conversation) Cycle for year 2019 using closing Accounts payable. Comment on the overall operating efficiency of the firm.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 18BEA

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The financial statements for Wiley Ltd are presented below:

Statement of profit or loss and other comprehensive income for Wiley Ltd for the year ending 30 June 2019

	$	$
Sales (credit)		250 000
Cost of sales
– Inventory—01 July 2018	(25 000)
– Purchases	(152 500)
– Inventory—30 June 2019	27 500	(150 000)
Gross profit		100 000
Selling and administrative expenses		(20 000)
Depreciation		(40 000)
Profit before tax		40 000
Income tax expense (20 per cent)		(10 000)
Profit after tax		30 000
Other comprehensive income		–
Total comprehensive income		30 000

Statement of financial position for Wiley Ltd as of 30 June 2019

	($)
Cash	34000
Accounts receivable	46000
Inventory (cost)	27500
Plant and equipment	125000
less Accumulated depreciation	(30000)
Land	50000
Total assets	252500
Share capital	150000
Retained earnings	30 000
Current liabilities Accounts payable Dividends payable	12 500 10 000
Non-current liabilities Long-term bonds	50 000
Total shareholders’ equity and liabilities	252500

Required:

Calculate the operating cycle for year 2019 using closing Accounts receivable.
Calculate the Cash (conversation) Cycle for year 2019 using closing Accounts payable.
Comment on the overall operating efficiency of the firm.

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