The balance sheets of Davidson Corporation reported net fixed assets of $320,000 at the end of 2009. The fixed-asset turnover ratio for 2009 was 4.0 and sales for the year totaled $1,480,000. Net fixed assets at the end of 2008 were:
A)$470,000.
B)$370,000.
C)$420,000.
D)None of these.$1,480,000 Average fixed assets = 4.0 Average fixed assets = $370,000, therefore net fixed assets at the end of 2008 must be $420,000 [($320,000 + x) 2] = $370,000; $320,000 + x = $740,000; x = $420,000

Question

Quizplus · Accepted Answer

Using the fixed-asset turnover ratio formula, we can solve for the average net fixed assets, which is $370,000. To find the net fixed assets at the end of 2008, we use the formula: (Net Fixed Assets at the end of 2008 + Net Fixed Assets at the end of 2009)/2 = $370,000. Solving for Net Fixed Assets at the end of 2008, we get $420,000. Therefore, the correct answer is C.

The Balance Sheets of Davidson Corporation Reported Net Fixed Assets