Answer (A) is correct . Inventory is the difference between quick assets and current assets. Since current liabilities are $120,000 and the current ratio is 2.0, current assets must be $240,000. Quick assets (current assets – inventory) are 1.5 times current liabilities, or $180,000. Therefore, inventory must be $60,000 ($240,000 – $180,000). Since inventory turnover was eight, cost of goods sold was 8 times inventory, or $480,000 (8 × $60,000). Cost of goods sold is apparently 60% of sales (gross profit is 40% of sales). Net sales were thus $800,000 ($480,000 COGS ÷ 60%).
Answer (B) is incorrect because The cost of goods sold is $480,000 (8 ¡Á $60,000 inventory).
Answer (C) is incorrect because The sum of current assets ($240,000) and the product of current liabilities and inventory turnover is $1,200,000.
Answer (D) is incorrect because Current assets equal $240,000. |
Perry Corporation’s net sales for the year were
