Burdick Corporation has provided the following financial data from its balance sheet:
$\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \
\text { Accounts receivable, net}&\$ 266,000 & \$ 250,000 \
\text { Inventory }&\$ 162,000 & \$ 190,000 \
\text {Total assets }&\$ 1,415,000 & \$ 1,390,000 \
\text {Total stockholders' equity }&\$ 991,000 & \$ 970,000
\end{array}$ Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000.
-The company's total asset turnover for Year 2 is closest to:
A) 0.99
B) 0.19
C) 5.32
D) 1.01

Question

Burdick Corporation has provided the following financial data from its balance sheet:
 $\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \
\text { Accounts receivable, net}&\$ 266,000 & \$ 250,000 \
\text { Inventory  }&\$ 162,000 & \$ 190,000 \
\text {Total assets  }&\$ 1,415,000 & \$ 1,390,000 \
\text {Total stockholders' equity }&\$ 991,000 & \$ 970,000
\end{array}$ Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000.
-The company's total asset turnover for Year 2 is closest to:
A) 0.99
B) 0.19
C) 5.32
D) 1.01

Quizplus · Accepted Answer

Total asset turnover is calculated as sales divided by average total assets. For Year 2, sales are $1,410,000. Average total assets are calculated as the sum of Year 2 and Year 1 total assets divided by 2, which is ($1,415,000 + $1,390,000) / 2 = $1,402,500. Therefore, total asset turnover for Year 2 is $1,410,000 / $1,402,500 = 1.005, which is closest to 1.01.

Burdick Corporation Has Provided the Following Financial Data from Its