Here are some questions at the end of the chapter that I didnt quite understand.

Question

Here are some questions at the end of the chapter that I didnt quite understand.

Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at $80 per share as a short-term investment. The shares were subsequently sold at $78 per share. The cost of the securities purchased and gain or loss on the sale were

Cost                             Gain or Loss

A $50,000                   $2,000 gain

B. $50,000                  $2,000 loss

C. $80,000                  $2,000 gain

D. $80,000                  $2,000 loss

Usman Department Store had beginning inventory $100,000, cost of goods sold $750,000, and ending inventory $150,000. What was Usman's inventory turnover?

a. 3 times.
b. 6 times. c. 7.5 times. d. 5 times.

Explanation / Answer

1. Gayton Corporation

The answer is " D. cost - $80,000 $2,000 loss "

Cost = 1,000 x 80 = $80,000

Loss = 1,000 x (80 - 78) = $2,000

2. Usman Department Store

The answer is " b. 6 times "

Average inventory = (100,000 + 150,000) / 2 = $125,000

Inventory turnover = cost of goods sold / average inventory

= 750,000 / 125,000 = 6 times

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