Question

Johnny Appleseed Brewing Company (JABC) has a quick ratio of 2.00; $38,250 in cash; $21,250 in accounts receivable; some inventory; total current assets of $85,000; and total current liabilities of $29,750. In its most recent annual report, JABC reported annual sales of $100,000 and a cost of goods sold equal to 65% of annual sales. How many times is Johnny Appleseed Brewing Company (JABC) selling and replacing its inventory? 0.35x 2.805x 3.92x 2.55x

Answer 1

2.55x

Step-by-step explanation:

Inventory Turnover:

COGS/Inventory

First, we solve for COGS:

annual sales: $100,000

COGS 65% of sales: 100,000 x 65% = $65,000

Then, we solve for inventory:

quick ratio:

(current assets - inventory)/current liabilities

(CA - inventory)/current liabilities = 2.00

(85,000 - inventory)/29,750 = 2.00

inventory = 85,000 - 29,750 x 2.00

inventory = 25,500

Inventory Turnover:

COGS/Inventory = 65,000/25,500 = 2.5490 = 2.55