Question

The following information is available for Barkley Company: 2017 2016 Accounts receivable $ 360,000 $400,000 Inventory 280,000 320,000 Net credit sales 3,000,000 1,400,000 Cost of goods sold 1,200,000 1,060,000 Net income 300,000 170,000 Calculate the inventory turnover for 2017. 4.0 times 2.0 times 2.4 times 4.3 times

Answer 1

Answer:

4.0 times

Explanation:

Given that,

2016:

Accounts receivables = $400,000

Inventory = 320,000

Net credit sales = 1,400,000

Cost of goods sold = 1,060,000

Net income = 170,000

2017:

Accounts receivables  = $360,000

Inventory = 280,000

Net credit sales = 3,000,000

Cost of goods sold = 1,200,000

Net income = 300,000

Inventory turnover ratio refers to the ratio between the cost of goods sold and average inventory.

Average inventory:

= (Beginning inventory + Ending inventory) / 2

= ($320,000 + $280,000) / 2

= $300,000

Therefore, the inventory turnover ratio for 2017 is as follows:

= Cost of goods sold / Average inventory

= 1,200,000 / 300,000

= 4.0 times