Question

Financial statement data for the year ending December 31 for Navajo Company follow: Sales $2,550,000 Net income 1,258,000 Fixed assets (net): Beginning of year 800,000 End of year 985,000 The fixed asset turnover ratio for Navajo Company on December 31 would be 2.9. 2.6. 1.4. None of these choices are correct.

Answer 1

Answer:

Fixed Asset Turnover Ratio=2.9 Times

Explanation:

Calculation for the fixed asset turnover ratio for Navajo Company on December 31

The first step is to find the Average fixed asset

Using this formula

Average fixed assets=Beginning of year fixed assets + End of year Fixed assets/2

Let plug in the formula

Average Fixed assets =800,000+985,000/2

Average Fixed assets =$1,785,000/2

Average Fixed assets=$892,500

The next step is to calculate for the Fixed asset turnover ratio

Using this formula

Fixed asset turnover ratio=Sales/Average

Let plug in the formula

Fixed Asset Turnover Ratio=$2,550,000/$892,500

Fixed Asset Turnover Ratio=2.9 Times

Therefore fixed asset turnover ratio for Navajo Company on December 31 will be 2.9 Times