Question

The balance sheets of Davidson Corporation reported net fixed assets of $332,000 at the end of 2018. The fixed-asset turnover ratio for 2018 was 4.0, and sales for the year totaled $1,540,000. Net fixed assets at the end of 2017 were:

Answer 1

Answer: $438,000

Explanation:

Average Fixed Assets in 2018;

= Sales / Fixed asset turnover ratio

= 1,540,000/4

= $385,000

One can also find 2018 Average fixed assets by;

= (Net fixed assets in 2018 + Net fixed assets in 2017) / 2

385,000 = (332,000 + Net fixed assets in 2017) / 2

770,000 = 332,000 + Net fixed assets in 2017

Net fixed assets in 2017 = 770,000 - 332,000

= $438,000