Answer: 12
Explanation: The ratio of number of times an inventory is used or sold in a specific period , generally a year, is called inventory turnover ratio. It can be computed by using the following formula :-
=
where,
cost of goods sold = beginning inventory + net purchase - ending inventory
= $50,000 + $460,000 - $30,000
= $ 480,000
average inventory =
=
= $40,000
so,
inventory turnover ratio =
= 12
Answer: Option (B) is correct.
Explanation:
Capital contribution by David = $40,000
Interest of David in partnership =
Total capital of the partnership after the admission of new partner:
=
= $200,000
Total capital of partnership before decreasing of obsolete inventory:
= $140,000 + $40,000 + $40,000
= $220,000
Therefore, value of decrease in inventory:
= Total capital before decrease - Total capital after decrease
= $220,000 - $200,000
= $20,000
The reduction in value of inventory will be distributed in old partners in ratio of 3:1
Hence,
Capital balance of Allen after admission of David:
=
= $125,000
Capital balance of Daniel after admission of David:
=
= $35,000