Question

During year 2, Rand Co. purchased $960,000 of inventory. The cost of goods sold for year 2 was $900,000, and the ending inventory at December 31, year 2, was $180,000. What was the inventory turnover for year 2? a. 6.4b. 6.0c. 5.3d. 5.0

Answer 1

Option (b) 6.0

Step-by-step explanation:

Data provided in the question:

Purchases = $960,000

Cost of goods sold = $900,000

Ending inventory = $180,000

Now,

Beginning inventory = Cost of goods available for sale - Purchases

= ( $900,000 + $180,000 ) - $960,000

= $120,000

Thus,

Average inventory = ( $120,000 + $180,000 ) ÷ 2

= $150,000

therefore,

Inventory turnover = Cost of goods sold ÷ Average inventory

= $900,000 ÷ 150,000

= 6.0

Option (b) 6.0