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CC9 COOKIE CREATIONS
(a) Answers to Natalie’s questions
1. Calculations you should perform on the statements are:
• Working capital = Current assets – Current liabilities
• Current ratio = Current assets ÷ Current liabilities
• Inventory turnover = Cost of goods sold ÷ Average inventory
• Days sales in inventory = Days in the year ÷ Inventory turnover
2. Other alternatives to extending credit to Curtis include:
• Waiting for 30 days to make the sale.
CC9 (Continued)
(a) (Continued)
3. The advantage of extending credit to customers is the anticipated
increase in sales expected from customers who will purchase goods
only if they can receive credit. The disadvantages of extending credit
are the additional costs incurred to keep track of amounts owed, the
additional costs incurred when staff need to be assigned to follow up
on late account balances, and the risk of not collecting a receivable
from a customer who is unable to pay.
(b)
June 1 Accounts Receivable ........................... 1,150
CCC8 (Continued)
(b) (Continued)
July 31 Accounts Receivable [$1,150 + $8] ................. 1,158
Notes Receivable ......................................... 1,150
