Question

At January 1, 2019, Gerolsteiner, Inc. had $140,000 of inventory, and at December 31, 2019, the Company had $125,000 in inventory. During the year Gerolsteiner bought $880,000 in inventory. The Company had total sales of $2,200,000 during 2019. What was Gerolsteiner’s approximate inventory turnover ratio?

Answer 1

Gerolsteiner’s approximate inventory turnover ratio = 6.75 times

Step-by-step explanation:

Given,

Beginning Inventory (January 1, 2019) = $140,000

Ending Inventory (December 31, 2019) = $125,000

Inventory Purchase = $880,000

Net Sales = $2,200,000

We know,

Inventory Turnover Ratio = Cost of Goods sold/Average Inventory

Here, cost of goods sold = Beginning Inventory + Purchase - Ending Inventory

Cost of goods sold = $140,000 + $880,000 - $125,000

Cost of goods sold = $895,000

Average Inventory = $(140,000+125,000)/2

Average Inventory = $132,500

Therefore, Inventory Turnover Ratio = $895,000/$132,500

Inventory Turnover Ratio = 6.75 times