Calculating Missing Balance Sheet Items Using Financial Ratios: A Step-By-Step Approach

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Calculating Missing Balance Sheet Items Using Financial Ratios: A Step - by - Step Approach From the values of the different ratios that follow, calculate the missing balance sheet items and complete the balance sheet. (30 points) Sales $300,000 Average collection period (days) : 55 Inventory Turnover (days) 40 Debt to asset ratio 0.4 Current ratio 2 Total Asset turnover 1.5 Fixed asset turnover 3 Assets Liabilities & Equity Cash $6,000 Accounts payable $6,000 Accounts Receivable _____ Notes Payable _______ Inventory ______ Accrued Expenses $600 Prepaid expenses _______ Total Current Liabilities ________ Total Current Assets ________ Bonds Payable __________ Fixed Assets _________ Common Stock $16,000 Total Assets _________ Retained earnings ________ Total Liabilities & Equity _________ Answer: To solve this problem, we need to work step by step using the information provided and the financial ratios to calculate the missing balance sheet items. Given Information: • Sales = $300,000 • Average Collection Period (days) = 55 days • Inventory Turnover (days) = 40 days • Debt to Asset Ratio = 0.4 • Current Ratio = 2 • Total Asset Turnover = 1.5 • Fixed Asset Turnover = 3 Step 1: Calculate Accounts Receivable The Average Collection Period (ACP) is given by: ACP=Accounts ReceivableSales×365 \ text{ACP} = \ frac{ \ text{Accounts Receivable}}{ \ text{Sales}} \ times 365 Rearrange to solve for Accounts Receivable : Accounts Receivable=ACP×Sales365 \ text{Accounts Receivable} = \ frac{ \ text{ACP} \ times \ text{Sales}}{365} Substitute the given values: Accounts Receivable=55×300,000365≈45,205.48 \ text{Accounts Receivable} = \ frac{55 \ times 300,000}{365} \ approx 45,205.48
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