Question

Selected financial information for Thornton Company for 2019 follows: Sales $ 2,000,000 Cost of goods sold 1,400,000 Merchandise inventory Beginning of year 159,000 End of year 200,000 Required Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turn over during 2019? (Round your answer to 2 decimal places.)

Answer 1

Answer:

7.80 times

Explanation:

First of all we have to calculate the average inventory

Opening inventory= 159,000

Closing inventory= 200,000

Average inventory= (opening inventory+closing inventory)/2

= ( 159,000+200,000)/2

= 359,000/2

= 179,500

The next step is to find the merchandise inventory turnover which is calculated as

= Cost of goods/ Average inventory

Cost of goods= $1,400,000

Average inventory= 179,500

= 1,400,000/179,500

= 7.799 times

= 7.80 times (to 2 decimal places)

Hence the merchandise inventory was turned over 7.80 times in 2019

Answer 2

Answer: 7.80 times

Explanation:

The Merchandise Inventory Formula can be calculated with the Inventory Turnover Ratio which aims to measure how often a company is able to change inventory over a period. The purpose being to see if the company in question is carrying enough Inventory per period.

The formula for this is,

= Cost of Goods sold / Average Inventory

Average Inventory = (Beginning Inventory + Ending Inventory ) / 2

= (159,000 + 200,000) / 2

= 359,000/2

= $170,500

Therefore,

Inventory Turnover Ratio = 1,400,000/170,500

= 7.7994

= 7.80

The Merchandise was turned over 7.80 times in 2019.