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# Depreciation of Costs of Goods

Use the following information for questions 26 through 30.
The following data are provided:
December 31
2008 2007
Cash \$ 375,000 \$ 250,000
Accounts receivable (net) 400,000 300,000
Inventories 650,000 550,000
Plant assets (net) 2,000,000 1,625,000
Accounts payable 275,000 200,000
Taxes payable 50,000 25,000
Bonds payable 350,000 350,000
10% Preferred stock, \$50 par 500,000 500,000
Common stock, \$10 par 600,000 450,000
Paid-in capital 400,000 325,000
Retained earnings 1,000,000 875,000
Net credit sales 3,200,000
Cost of goods sold 2,100,000
Operating expenses 725,000
Net income 375,000

Depreciation included in cost of goods sold and operating expenses is \$305,000. On May 1, 2008, 15,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2008.

26. The receivables turnover for 2008 is
a. 3,200 ÷ 400.
b. 2,100 ÷ 400.
c. 3,200 ÷ 350.
d. 2,100 ÷ 350.

I got a for the answer

27. The inventory turnover for 2008 is
a. 3,200 ÷ 650.
b. 2,100 ÷ 650.
c. 3,200 ÷ 600.
d. 2,100 ÷ 600.

28. The profit margin on sales for 2008 is
a. 1,100 ÷ 3,200.
b. 375 ÷ 3,200.
c. 1,100 ÷ 2,100.
d. 375 ÷ 2,100.

29. The rate of return on common stock equity for 2008 is
a. 375 ÷ 1,800.
b. 375 ÷ 2,000.
c. 325 ÷ 1,800.
d. 325 ÷ 2,000.

Here is where I need help. I know that it is not c or d.

30. The book value per share of common stock at 12/31/08 is
a. 1,950 ÷ 60.
b. 1,940 ÷ 60.
c. 1,950 ÷ 55.
d. 2,000 ÷ 55.

Here is where I need your help. I know it is not a or b.

#### Solution Preview

26. The receivables turnover for 2008 is
a. 3,200 ÷ 400.
b. 2,100 ÷ 400.
c. 3,200 ÷ 350.
d. 2,100 ÷ 350.

Receivable turnover = Net credit sales / average accounts receivables =3200/350

27. The inventory turnover for 2008 is
a. 3,200 ÷ 650.
b. 2,100 ÷ 650.
c. 3,200 ÷ 600.
d. 2,100 ÷ 600.

Inventory turnover = Cost of goods sold / average inventory ...

#### Solution Summary

This solution identifies the correct values for the depreciation of cost of goods by identifying the correct answer and giving a justification,

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