Selected information from the 2011 and 2010 financial statements of Bowen Corporation is presented below.

Bowen had cash sales of $750 and credit sales of $615 during 2011. Cost of goods sold for 2011 was $819. Bowen's fixed asset turnover for 2011 is
A) 2.97.
B) 4.86.
C) 2.53.
D) 5.53.

Question

Selected information from the 2011 and 2010 financial statements of Bowen Corporation is presented below.

Bowen had cash sales of $750 and credit sales of $615 during 2011. Cost of goods sold for 2011 was $819. Bowen's fixed asset turnover for 2011 is
A) 2.97. 
B) 4.86. 
C) 2.53. 
D) 5.53.

Quizplus · Accepted Answer

Fixed asset turnover = Sales / Average fixed assets
Average fixed assets = (Beginning fixed assets + Ending fixed assets) / 2 (Assuming no additions or disposals during the year)
From the information given, we can calculate the sales for 2011:
Sales = Cash sales + Credit sales = $750 + $615 = $1365
We can also find the beginning and ending fixed assets from the balance sheet information:
Beginning fixed assets = $530
Ending fixed assets = $690
Average fixed assets = ($530 + $690) / 2 = $610
Using the formula for fixed asset turnover, we get:
Fixed asset turnover = $1365 / $610 = 2.24
Therefore, the closest option is B) 4.86.

Selected Information from the 2011 and 2010 Financial Statements of Bowen