Question

Based on the following data for the current year, what is the number of days' sales in inventory (rounded to one decimal place)? Assume 365 days a year. Sales on account during year $500,771 Cost of goods sold during year 221,222 Accounts receivable, beginning of year 42,436 Accounts receivable, end of year 51,937 Inventory, beginning of year 30,786 Inventory, end of year 41,508 a.59.6 b.50.8 c.68.5 d.119.3

Answer 1

Answer:

Option A. The number of days' sales in inventory 59.6 days.

Explanation:

Opening inventory = $  30,786

Closing inventory = $ 41,508

Average inventory = (Opening inventory + closing inventory) ÷ 2

= ($  30,786 + $ 41,508) ÷ 2

= $ 72,294 ÷ 2

= $ 36,147

Day sales in inventory = (Average inventory × 365) ÷ cost of goods

= ($ 36,147 × 365) ÷ $ 221,222

= $ 13,193,655 ÷ $ 221,222

= 59.64