Question

Holliman Corp. has current liabilities of $407,000, a quick ratio of 1.90, inventory turnover of 4.50, and a current ratio of 3.40. What is the cost of goods sold for the company?

Answer 1

Answer:

Cost of goods will be $4670325

Explanation:

We have given current liabilities = $407000

A quick ratio = 1.90

Current ratio is 3.40 and inventory turnover = 4.50

We know that current ratio is the ratio of current assets and current liabilities

So $3.4=\frac{current\ assets}{current\ liabilities}$

So current assets = $1383800

Now quick ratio is equal to = $\frac{current\ assets-inventory}{curtrent\ liabilities}$

So $0.85=\frac{1383800-inventory}{407000}$

Inventory = $1037850

Inventory turnover is given 4.5

So $4.5=\frac{cost\ of\ goods\ sold}{average\ inventory}$

$4.5=\frac{cost\ of\ goods\ sold}{1037850}$

So cost of goods sold = 4.5×$1037850 = $4670325