Sellograph Corporation reports sales of $10M for Year 2, with a gross profit margin of 40%.

| June 1, 2016

Question
Sellograph Corporation reports sales of $10M for Year 2, with a gross profit margin of 40%. 20% of Sellograph’s sales are on credit.

Year 1

Year 2

Accounts receivable

$ 150,000

$ 170,000

Inventory

900,000

1,000,000

Accounts payable

1,100,000

1,200,000

25. Accounts receivable days outstanding at the end of Year 2 is (use year-end receivable balance):
A) 30.6 days
B) 28.8 days
C) 27.0 days
D) 6.1 days

26. Accounts payable days outstanding at the end of Year 2 is (use average accounts payable for the year):
A) 57.0 days
B) 69.0 days
C) 72.0 days
D) 43.2 days

27. Days in inventory at the end of Year 2 is (use year-end inventory amount):
A) 60.0 days
B) 69.0 days
C) 66.0 days
D) 54.0 days

36. When examining quarterly results of a company in a seasonal business it is useful
A) to compare to the preceding quarter
B) to match the company’s results against economic statistics
C) to compare to the same period in the prior year
D) to analyze using a percentage income statement

38. Which of the following is not a factor in producing earnings forecasts?
A) Estimating the level of earnings
B) Separation of recurring and nonrecurring components
C) Recognizing potential earnings management
D) Recognizing potential income smoothing

40. Which of the following is not a typical form of earnings management?
A) Changing accounting estimates
B) Offsetting one-time gains and losses
C) Changing accounting principles
D) Changing auditors

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