# Compute the operating cycle for King Corporation.

## Question:

A partial balance sheet and income statement for King Corporation follow:

 KING CORPORATION Partial Balance Sheet December 31, 2009 Assets Current Assets Cash $33,493 Marketable securities 215,147 Receivables, less allowance of$6,000 255,000 Inventories, LIFO 523,000 Prepaid expenses 26,180 Total Current assets $1,052,820 Liabilities Current liabilities Trade accounts payable$103,689 Notes payable (primarily as bonds) and commercial paper 210,381 Accrued expenses and other liabilities 320,602 Income taxes payable 3,120 Long-term debt 22,050 Total current liabilities $459,842  KING CORPORATION Partial Income Statement For Year Ended December 31, 2009 Net sales$3,050,600 Miscellaneous income 45,060 $3,095,660 Cost and expenses: Cost of sales$2,185,100 Selling, general and administrative expenses 350,265 Interest expense 45,600 Income taxes 300,000 $2,880,965$214,695

Note: The receivables at December 31, 2008 were $280,000, net of allowance of$8,000, for a gross receivables figure of $288,000. The inventory at December 31, 2008 were$565,000.

Compute the operating cycle for King Corporation.

## Operating cycle:

It is the time period which is taken by the company to make their transaction from producing the goods into final sale of goods to the customer and receive the consideration in the form of cash for the final goods.

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1.

{eq}\begin{align*} {\rm\text{Ending Accounts Receivable}} &= {\rm\text {Net Accounts Receivable}} + {\rm\text {Allowance}}\\ &= \$255,000 + \$...

Operating Cycle in Accounting: Definition & Formula

from

Chapter 22 / Lesson 42
3.9K

An operating cycle consists of lead time, production time, sales time, delivery time, and cash-collection time. Learn the definitions of the parts of the operating cycle, how long the operation cycles are for different industries, and the formula used for calculating the operating cycle in accounting.