The following accounts and balances are taken from year end financial statements
ID: 2384973 • Letter: T
Question
The following accounts and balances are taken from year end financial statements. Use the information to calculate the inventory turnover ratio and the days in inventory for YEAR 2. (Note that days in inventory is sometimes referred to as the average sale period). Round your answers to one place after the decimal point.
Year 3 Year 2 Year 1
Current assets
Cash and marketable securities 150,000 $ 100,000 $ 80,000
Accounts receivable, net 180,000 160,000 140,000
Inventory 200,000 200,000 180,000
Total current assets 510,000 460,000 400,000
Current liabilities
Accounts payable $ 130,000 $ 160,000 $ 140,000
Accrued liabilities 30,000 50,000 40,000
Notes payable, short term 130,000 130,000 130,000
Total current liabilities 290,000 340,000 310,000
Sales (all on account) $2,550,000 $2,100,000
Cost of goods sold 1,700,000 $1,387,000
Explanation / Answer
Average inventory is (200,000+180,000)/2= 190,000 Inventory turnover is Cost of goods sold/Avg inventory so we have 1,387,000/190,000= 7.3x Days in inventory is 365/7.3= 50 days