Anderson Plumbing Fixtures reported the following income statement for the year ended December 31, 2017

Question

Anderson Plumbing Fixtures
Income Statement
Year Ended December 31, 2017
Sales Revenue $ 258,000
Cost of Goods Sold
Beginning Merchandise Inventory $ 43,500
Net Cost of Purchases 145,000
Cost of Goods Available for Sale 188,500
Less: Ending Merchandise Inventory 38,000
Cost of Goods Sold: 150,000
Gross Profit 107,500
Operating Expenses 87,200
Net Income $ 20,300

Compute inventory turnover rate for the year. (Round to two decimal places.)
Compute days' sales in inventory for the year. (Round to two decimal places.)
What will be an ideal response

Answer 1

Inventory turnover is 3.69 times for the year.

Calculations:

Average merchandise inventory = (Beginning merchandise inventory + Ending merchandise inventory) / 2
= ($43.500 + $38,000 ) / 2 = $40,750

Inventory turnover = Cost of goods sold / Average merchandise inventory
= $150,500 / $40,750
= 3.69 times for the year

Days' sales in inventory is 98.92 days for the year.

Calculations:

Days' sales in inventory = 365 days / Inventory turnover
= 365 / 3.69 times
= 98.92 days