Question

A company reports the following amounts for 2021:_________. Inventory (beginning) $ 20,000 Inventory (ending) 35,000 Purchases 170,000 Purchase returns 10,000 Calculate cost of goods sold, the inventory turnover ratio, and the average days in inventory for 2021. (Use 365 days in a year. Round your intermediate and final answers to 1 decimal place.)

Answer 1

Answer:

Cost of goods sold $145,000

Inventory turnover ratio 5.27 times

Average days in turnover 69 days

Explanation:

1. Cost of goods sold

= Beginning inventory + [Purchases - Purchases return ] - Ending inventory

= $20,000 + [$170,000 - $10,000] - $35,000

= $20,000 + $160,000 - $35,000

= $145,000

2. Inventory turnover ratio

= Cost of goods sold ÷ Average inventory

Given that;

Cost of goods sold = $145,000

Average inventory = (Beginning inventory + Ending inventory) ÷2

= ($20,000 + $35,000) ÷ 2

= $27,500

Therefore,

Inventory turnover ratio = $145,000 ÷ $27,500

= 5.27 times

3. Average days in turnover

= Average inventory / Cost of sales × Number of days in period

Average inventory = $27,500

Cost of sales = $145,000

Number of days = 365 day

Average days in turnover = ($27,500/$145,000) × 365 days

= 69 days