Danny Corporation's total current assets are valued at $233,000 and are comprised of cash, accounts receivable and inventory. Determine the value of the cash account given the following information: sales = $225,000; cost of goods sold = $135,000; accounts receivable turnover = 3 times; inventory turnover = 1.5 times.
A) $68,000
B) $66,000
C) $64,000
D) $62,000
E) $60,000

Question

Quizplus · Accepted Answer

The accounts receivable turnover is calculated as sales divided by accounts receivable, so accounts receivable = sales / accounts receivable turnover = $225,000 / 3 = $75,000. The inventory turnover is calculated as cost of goods sold divided by inventory, so inventory = cost of goods sold / inventory turnover = $135,000 / 1.5 = $90,000. Therefore, cash = total current assets - (accounts receivable + inventory) = $233,000 - ($75,000 + $90,000) = $68,000.

Danny Corporation's Total Current Assets Are Valued at $233,000 and Are