On January 1,2017 Hilldale Company had total assets of $365,000.During the year,the company purchased new machinery worth $83,000 and promised to pay the amount due after two years.Throughout the year,it earned revenue of $60,000 every month.Calculate the asset turnover ratio.

Question

Quizplus · Accepted Answer

Asset turnover ratio = Net sales / Average total assets
Net sales = $60,000 × 12 = $720,000
Average total assets = [$365,000 + ($365,000 + $83,000)] / 2 = $406,500
Asset turnover ratio = 720,000 / 406,500 = 1.77 times

On January 1,2017 Hilldale Company Had Total Assets of $365,000