The following information was available for the year ended December 31, 2016: $4

Question

The following information was available for the year ended December 31, 2016: $438,000 Net sales Cost of goods sold Average accounts recelvable for the year Accounts recelvable at year-end Average Inventory for the yea Inventory at year-end 29,200 33,600 1165,1x) 110,400 Required: (a.) Calculate the inventory turnover for 2016. (b.) Calculate the number of days' sales in inventory for 2016, using year-end inventories (c.) Calculate the accounts receivable turnover for 2016 (d.) Calculate the number of days' sales in accounts receivable for 2016, using year-end accounts receivable.

Explanation / Answer

Answer a. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Inventory Turnover Ratio = $350,400 / $116,800 Inventory Turnover Ratio = 3 times Answer b. Assuming 360 days in a year No. of Days' Sales in Inventory = (Ending Inventory / Cost of Goods Sold) X 360 days No. of Days' Sales in Inventory = ($110,400 / $350,400) X 360 Days No. of Days' Sales in Inventory = 113.42 Days (Approx.) Assuming 365 days in a year No. of Days' Sales in Inventory = (Ending Inventory / Cost of Goods Sold) X 365 Days No. of Days' Sales in Inventory = ($110,400 / $350,400) X 365 Days No. of Days' Sales in Inventory = 115 Days (Approx.) Answer c. Accounts Receivable Turnover Ratio = Sales / Average Accounts Receivable Accounts Receivable Turnover Ratio = $438,000 / $29,200 Accounts Receivable Turnover Ratio = 15 times Answer d. Assuming 360 days in a year No. of Days' Sales in Accounts Receivable = (Ending Accounts Receivable / Sales) X 360 days No. of Days' Sales in Inventory = ($33,600 / $438,000) X 360 Days No. of Days' Sales in Inventory = 27.62 Days (Approx.) Assuming 365 days in a year No. of Days' Sales in Accounts Receivable = (Ending Accounts Receivable / Sales) X 365 days No. of Days' Sales in Inventory = ($33,600 / $438,000) X 365 Days No. of Days' Sales in Inventory = 28 Days (Approx.)

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