BUS 1102 Unit 5 - Learning Journal PDF

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BUS 1102 Unit 5 – Learning JournalThe Learning Journal is a space where you should reflect on what was learned during the week and how it applies to your daily life and will help you with your life (career) goals. For this week, you will be computing different financial ratios based on information p...

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BUS 1102 Unit 5 – Learning Journal The Learning Journal is a space where you should reflect on what was learned during the week and how it applies to your daily life and will help you with your life (career) goals. For this week, you will be computing different financial ratios based on information presented in the tables below. Chart 1 ABC Group 123 Company Beginning accounts receivable; Ending accounts receivable Net credit sales

$75,000

$92,000

$125,000 $324,000

$123,000 $401,000

Chart 2 Balance Sheet Year 1 Beginning Inventory $29,000 Purchases $10,000 Goods Available for $39,000 Sale Ending Inventory $10,826 Cost of Goods Sold Please complete the following tasks:

Income Statement Balance Sheet Income Statement Year 1 Year Year $10,826 $7,435 $18,261 $28,174

$5,980 $12,281

$10,826

1. Complete each of the calculations listed below (A – C). A. (Use Chart 1) You are an investor looking to contribute financially to either the ABC Group or the 123 Company. Based on the information provided: o o

Compute the accounts receivable turnover ratio. Compute the number of days’ sales in receivables ratio for both ABC Group

o

and 123 Company (round all answers to two decimal places). Interpret the outcomes, stating which company you would invest in and why.

B. (Use Chart 2) Compute the inventory turnover ratio. o

Interpret the outcomes

C. (Use Chart 2) Compute the number of days’ sales in inventory ratio. o

Interpret the outcomes

2. Interpret the outcomes for each of the calculations performed using chart 1 and chart 2 (A – C). 3. Did you encounter issues completing any Unit 5 assignments? Please explain. 4. You are halfway through the course. What are your thoughts about the course and the material that has been covered at this point?

Be sure that your Learning Journal entry is a minimum of 500 words. Make sure you cite and reference your sources of information in the APA format.

First Task: A. (Use Chart 1) You are an investor looking to contribute financially to either the ABC Group or the 123 Company. Based on the information provided: 

Compute the accounts receivable turnover ratio.

According to Franklin et al. (2020), the account receivable turnover ratio = Net credit sales / Average accounts receivable. The average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2. ABC Group: Net credit sales = $324,000 Average Accounts Receivable = ($75,000 + $125,000) / 2 = $100,000 Accounts receivable turnover ratio = $324,000 / $100,000 = 3.24 123 Company: Net credit sales = $401,000 Average Accounts Receivable = ($92,000 + $123,000) / 2 = $107,500 Accounts receivable turnover ratio = $401,000 / $107,500 = 3.73 

Compute the number of days’ sales in receivables ratio for both ABC Group and 123 Company (round all answers to two decimal places).

According to Franklin et al. (2020), the number of days’ sales in receivables ratio = 365 / Accounts receivable turnover ratio. ABC Group: Accounts receivable turnover ratio = 3.24 The number of days’ sales in receivables ratio = 365 / 3.24 = 112.65 123 Company: Accounts receivable turnover ratio = 3.73 The number of days’ sales in receivables ratio = 365 / 3.73 = 97.86 

Interpret the outcomes, stating which company you would invest in and why.

After interpreting the outcomes, I would invest in 123 Company. The accounts receivable turnover ratio in 123 Company is higher than ABC Group. The accounts receivable turnover ratio determines “how many times (i.e., how often) accounts receivable is collected during an operating period and converted to cash. A higher number of times indicates that receivables are collected quickly” (Franklin et al., 2020, p. 595). So, 123 Company has a higher accounts receivable turnover ratio than ABC group, which means 123 Company collects accounts receivables faster than ABC Group. Looking at the number of days’ sales in receivables ratio of both companies, we can see that 123 Company collects accounts receivable in fewer days than ABC Group. This is why I would invest in 123 Company! B. (Use Chart 2) Compute the inventory turnover ratio. According to Franklin et al. (2020), the inventory turnover ratio = Cost of goods sold / Average inventory. The average inventory = (Beginning inventory + Ending inventory) / 2. Year 1: Cost of goods sold = $28,174 Average inventory = ($29,000 + $10,826) / 2 = $19,913 Inventory turnover ratio = $28,174 / $19,913 = 1.41 Year 2: Cost of goods sold = $10,826 Average inventory = ($10,826 + $5,980) / 2 = $8,403 Inventory turnover ratio = $10,826 / $8,403 = 1.29 

Interpret the outcomes:

The outcomes show that the inventory turnover ratio declined in year 2, which is a negative trend. This might indicate that “the inventory balance might be too high to be practical for this volume of sales” (Franklin et al., 2020, p. 675). Also, this might indicate that there is a decline in sales. C. (Use Chart 2) Compute the number of days’ sales in inventory ratio. According to Franklin et al. (2020), the number of days’ sales in inventory ratio = average inventory / average daily cost of goods sold. The average inventory = (Beginning inventory + Ending inventory) / 2. The average daily cost of goods sold = Cost of goods sold / 365. Year 1: Cost of goods sold = $28,174 Average inventory = ($29,000 + $10,826) / 2

= $19,913 Average daily cost of goods sold = $28,174 / 365. = 77.19 Number of days’ sales in inventory ratio = $19,913 / 77.19 = 257.97 Year 2: Cost of goods sold = $10,826 Average inventory = ($10,826 + $5,980) / 2 = $8,403 Average daily cost of goods sold = $10,826 / 365. = 29.66 Number of days’ sales in inventory ratio = $8,403 / 29.66 = 283.31 

Interpret the outcomes:

The outcomes show that the number of days’ sales in inventory ratio increased in year 2. This indicates that it’s taking more time to sell the inventory, which is a negative trend. So, the management has to make a “reduction in the inventory balance might be appropriate, or as an alternative, increased sales efforts could turn the ratio toward a more positive trend” (Franklin et al., 2020, p. 676). Second Task: Interpret the outcomes for each of the calculations performed using chart 1 and chart 2 (AC). In chart 1, the outcomes show that 123 Company is doing better than the ABC Group by finding the accounts receivables turnover ratio and the number of days’ sales in receivables ratio. Both ratios show that 123 Company is collecting its accounts receivable faster than ABC Group, which indicates that 123 Company is doing better. While in chart 2, the outcomes show that the inventory turnover ratio declined and the number of days’ sales in inventory ratio increased in year 2, which indicates the company is not doing great in year 2 because of decline in sales and increase in the time of selling the inventory.

Third Task: Did you encounter issues completing any Unit 5 assignments? Please explain. To be honest, I didn’t encounter any issues completing any Unit 5 assignments. All assignments were fun to complete because they were mostly applying knowledge. I believe that applying the knowledge I learned from reading is a great way to understand the material much more, and all assignments this week were more of applying knowledge to real-life situations.

This is why I had a great time completing this week’s assignments, and this is why I didn’t encounter any issues. Fourth Task: You are halfway through the course. What are your thoughts about the course and the material that has been covered at this point? I’m halfway through the course and time went very fast! I’m really enjoying this course. Although I have to keep in my mind a lot of different formulas, I’m definitely able to handle them all. Most assignments asked me to apply the knowledge to real-life examples, which helps in understanding the material and makes the accounting formulas easier to stay in my mind. The material that has been covered at this point is very informative and essential to learn because accounting is a very important part of learning business. Words Count (Answers Only): 893 Words. Reference: Franklin, M. Graybeal, P. & Cooper, D. (2020). Principles of accounting, volume 1: Financial accounting. OpenStax Rice University. https://openstax.org/details/books/principlesfinancialaccounting...