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Chapter 6: Q6TI (page 347)

The Opa’s Carving Shop had the following financial data for the year ended December 31, 2018:

Cost of Goods Sold $484,000

Beginning Merchandise Inventory 88,800

Ending Merchandise Inventory 111,200

What are the inventory turnover and days’ sales in inventory for the year?

Short Answer

Expert verified

Inventory Turnover: 4.84

Days’ Sales in Inventory: 75.41 days

Step by step solution

01

Inventory Turnover

InventoryTurnover=CostofgoodssoldAverageInventory=$484,000$88,800+$111,2002=$484,000$100,000=4.84

02

Days’ Sales in inventory

Days'SalesinInventory=No.ofdaysinayearInventoryTurnover=3654.84=75.41days

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Most popular questions from this chapter

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

4. Which method results in the largest gross profit, and why?

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

3. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the weighted-average inventory costing method. Round allamounts to the nearest cent.

Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business’s cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.

Requirements

3. At what amount should the company report cost of goods sold on the incomestatement?

Futuristic Electronic Center began October with 65 units of merchandise inventory that cost \(82 each. During October, the store made the following purchases:

Oct. 3 25 units @ \) 90 each

12 30 units @ \( 90 each

18 35 units @ \) 96 each

Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80 units of merchandise inventory are on hand.

Requirements

2. Net sales revenue for October totaled $28,000. Compute Futuristic’s gross profit for October using each method.

Discuss some measures that should be taken to maintain control over merchandise inventory.
See all solutions

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