(The following information applies to the questions displayed below.) 2. Calcula

Question

(The following information applies to the questions displayed below.) 2. Calculate the inventory turnover ratio for each company. Lewis Incorporated and Clark Enterprises report the following amounts for the year. Inventory Turnover Ratio Lewis Clark $ 34,000 $ 60,000 Lewis times Inventory (beginning) Inventory (ending) Purchases Purchase returns 28,000 70,000 391,000 223,000 25,000 70,000 Clark times value: 6.53 points 3. Calculate the average days in inventory for each company. (Round your intermediate calculations to 1 decimal place.) Required: 1. Calculate cost of goods sold for each company. Average Days in Inventory Lewis Clark Lewis Beginning inventory Clark days Cost of goods available for sale Cost of goods sold 4. Which company appears to be managing its inventory more efficiently? Lewis Incorporated Clark Enterprises

Explanation / Answer

                                   Lewis = $34000+$391000-$25000-$28000=$372000

                                 Clark=$60000+$223000-$70000-$70000=$143000

           

Average stock= Opening Stock+ Closing Stock/2

Lewis=$34000+$28000/2=$48000

Clark=$60000+$70000/2= $95000

Ratio

Lewis=$372000/$48000=7.75

Clark=$143000/$95000=1.51

     

                   Lewis=365/7.75=47 days

                    Clark=365/1.51=241 days

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