Redribbon Gallery Reported the Following Assets on Its December 31

question 43

Essay

Redribbon Gallery reported the following assets on its December 31, 2015 balance sheet:
$$\begin{array} { l c c } \text { Cash } & \text { Dec. } 31,2015 & \text { Dec. 31, 2014 } \\\text { Accounts Receivable } & \$ 35,000 & \$ 28,000 \\\text { Merchandise Inventory } & 97,000 & 85,000 \\\text { Prepaid Expenses } & 80,000 & 6 2 , 0 0 0 \\\text { Property, plant, and equipment, net } & 29,000 & 20,000 \\\text { rent } & 3 0 , 0 0 0& 18,000\end{array}$$ If the net sales for the year amounted to $850,000, what is the asset turnover ratio for 2015?

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are accounted for in the period they are incurred, such as selling and administrative expenses.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all units available for sale during the period.

Equivalent Units

A concept in process costing that converts partially completed units into a number of fully completed units to accurately calculate costs.

Job Costing

An accounting method used to track the costs associated with a specific job or project to determine its profitability.