Textbook assignment Week 4 ACC/491

8-16 a. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days,
and accounts payable turn days for the years ended 20×2, 20×3, 20×4, 20×5.
(000s omitted for all)
-Purchases 20×2 $2,993 ($1,327 – 1,025 + 2,691)
20×3 $2,171 ($1,099 – 1,327 + 2,399)
20×4 $1,999 ($1,003 – 1,099 + 2,095)
20×5 $1,883 ($1,027 – 1,003 + 1,859)
-Gross Margin 20×2 52% ($5,638 – 2,691 / 5,638)
20×3 48% ($4,623 – 2,399 / 4,623)
20×4 48% ($4,022 – 2,095 / 4,022)
20×5 52% ($3,905 – 1,859 / 3,905)
-Inventory turn days 20×2 179.99 ($1,327 / 2,691 * 365)
20×3 167.21 ($1,099 / 2,399 * 365)
20×4 174.75 ($1,003 / 2,095 * 365)
20×5 201.64 ($1,027 / 1,859 * 365)
-Accounts receivable turn days 20×2 70.38 ($5,638 / [837 + 1,335] / 2 = 5.19, 365/5.19)
20×3 96.05 ($4,623 / [$1,335 + 1,121] / 2 = 3.8, 365/3.8 )
20×4 94.56 ($4,022 / [1,121 + 962] / 2 = 3.86, 365/3.86)
20×5 83.33 ($3,905 / [962 + 822] / 2 = 4.38, 365/4.38)
-Accounts payable turn days 20×2 33.18 ($2,993 / [164 + 380] / 2 = 11, 365/11)
20×3 50.84 ($2,171 / [380 + 225] / 2 = 7.18, 365/7.18)
20×4 38.87 ($1,999 / [225 + 201] / 2 = 9.39, 365/9.39)
20×5 36.43 ($1,883 / [201 + 175] / 2 = 10.02, 365/10.02)
b. Describe the trends identified by performing analytical procedures in the gross operating
cycle, the net operating cycle, and gross margin.
Gross operating cycle 20×2 250.37 (179.99 + 70.38)
20×3 263.26 (167.21 + 96.05)
20×4 269.31 (174.75 + 94.56)
20×5 284.97 (201.64 + 83.33)
There is an upward trend in the gross operating cycle; this shows operations are not being run efficiently in regards to managing working capital.
Net operating cycle 20×2 217.19 (250.37 – 33.18)
20×3 212.42 (263.26 – 50.84)
20×4 230.44 (269.31 –…