The balance sheets of Davidson Corporation reported net fixed assets of $320,000 at the end of 2016.The fixed-asset turnover ratio for 2016 was 4.0,and sales for the year totaled $1,480,000.Net fixed assets at the end of 2015 were:
A)$470,000.
B)$370,000.
C)$420,000.
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

The fixed-asset turnover ratio is calculated as Sales / Average Net Fixed Assets. Given the turnover ratio of 4.0 and sales of $1,480,000, the average net fixed assets for the year is $1,480,000 / 4.0 = $370,000. Since the net fixed assets at the end of 2016 were $320,000, we can set up the equation for the average: (Net Fixed Assets at end of 2015 + $320,000) / 2 = $370,000. Solving for the net fixed assets at the end of 2015 gives $420,000.

The Balance Sheets of Davidson Corporation Reported Net Fixed Assets