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HACTEHA [7]
3 years ago
7

The following balances come from the financial statements of Way Industries: Sales revenue $850,000; Accounts receivable $280,00

0; Beginning inventory $50,000; Ending inventory $30,000; Net purchases $460,000; Sales returns $50,000; Sales discount $20,000. Given this information, what is the company's inventory turnover ratio? a) 28.33. b) 16.0. c)21.25. d) 12.0.
Business
1 answer:
finlep [7]3 years ago
6 0

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 :-

= \frac{cost\of\goods\sold}{average\inventory}

where,

cost of goods sold = beginning inventory + net purchase - ending inventory

                               = $50,000 + $460,000 - $30,000

                               = $ 480,000

average inventory  = \frac{beginning\invetory+closing\inventory}{2}

                               =\frac{50000+30000}{2}

                               = $40,000

so,

inventory turnover ratio = \frac{480000}{40000}

                                       = 12

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See the errors identified below.

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Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached pdf file for the complete question with the sorted data.

The explanation of the answer is now given as follows:

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2. The accountant debited laundry suppliers expense instead of crediting laundry suppliers for $3,000.

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