Question

A company's beginning inventory is $2,000 and its ending inventory is $1,000. The inventory turnover is 6 times. Cost of goods sold for the year must equal____________.

Answer 1

Answer:

$9,000

Explanation:

The formula to compute the inventory turnover ratio is shown below:

Inventory turnover ratio = Cost of goods sold ÷ average inventory

where,  

Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2

= ($2,000 + $1,000) ÷ 2

= $1,500

So, the cost of goods sold is

6 times = Cost of goods sold ÷ $1,500

So, the cost of goods sold is $9,000