Question

Pretty, Inc. provides the following​ data:2017 2016Cash $28,000 $21,000Accounts Receivable, Net 40,000 40,000Merchandise Inventory 53,000 30,000Property, Plant, and Equipment, Net 124,000 91,000Total Assets $245,000 $182,000Net Credit Sales $240,000Cost of Goods Sold (130,000 )Gross Profit $110,000Calculate days' sales in inventory for 2017. (Round any intermediate calculations and your final answer to two decimal places.)

Answer 1

Answer:

The days' sales in inventory for 2017 is 116.61 days

Explanation:

For computing the days sales in inventory first, we have to compute the inventory turnover ratio which is shown below:

Inventory turnover ratio = (Cost of goods sold ÷ Average inventory)

where,  

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

= ($30,000 + $53,000) ÷ 2

= $41,500

And, the cost of good sold is $130,000

Now put these values to the above formula  

So, the answer would be equal to  

= $130,000 ÷ $41,500

= 3.13 times.

And, the Days sales in inventory  

= (Total number of days in a year ÷ inventory turnover ratio )

= 365 days ÷ 3.13 times

= 116.61 days