On January 1, 2017 Hilldale Company had total assets of $365,000. During the year, the company purchased new machinery worth $83,000 and promised to pay the amount due after two years. Throughout the year, it earned revenue of $60,000 every month. Calculate the asset turnover ratio.
A) 1.01 times
B) 1.81 times
C) 1.77 times
D) 1.61 times
C) 1.77 times
Explanation: Asset turnover ratio = Net sales / Average total assets
Net sales = $60,000 × 12 = $720,000
Average total assets = [$365,000 + ($365,000 + $83,000)] / 2 = $406,500
Asset turnover ratio = 720,000 / 406,500 = 1.77 times
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