Question

The January 28, 2017 (fiscal year 2016) financial statements of Caleres, Inc. reported the following information (in thousands):

2016 2015

Cost of sales $1,517,397 $1,529,527
Inventories, net 585,764 546,745
LIFO reserve 4,345 4,094

The 2016 average days inventory outstanding is: Select one:
A. 136.2 days
B. 133.9 days
C. 121.5 days
D. 49.6 days
E. None of the above

Answer 1

A. 136.2 days

Step-by-step explanation:

To compute the average days inventory outstanding, we have to find out the turnover ratio first

Cost of goods sold ÷ Average inventory

where,

Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2

= ($546,745 + $585,764) ÷ 2

= $566,254

And, the cost of good sold is $1,517,397

Now put these values to the above formula

So, the answer would be equal to

= $1,517,397 ÷ $566,254.50

= 2.67 times

Now, Days in inventory = Total number of days in a year ÷ inventory turnover ratio

= 365 days ÷ 2.67 times

= 136.70 days approx