Question

Montcalm Corp. has current liabilities of $365,000, a quick ratio of 0.85, inventory turnover of 5.8, and a current ratio of 1.4. What is the cost of goods sold for the company? (Omit $ sign in your response.) Cost of goods sold......... $

Answer 1

The cost of goods sold for Montcalm Corp. is calculated using current liabilities, quick ratio, inventory turnover, and current ratio, resulting in $1,164,350.

Step-by-step explanation:

The student asked about calculating the cost of goods sold for Montcalm Corp. Given the current liabilities, quick ratio, inventory turnover, and current ratio, we can solve the problem using financial ratios and inventory management metrics.

• First, we use the quick ratio to find the quick assets. Quick ratio is calculated by dividing quick assets (current assets minus inventory) by current liabilities. Therefore, Quick Assets = Quick Ratio * Current Liabilities = 0.85 * $365,000 = $310,250.
• Next, we calculate current assets using the current ratio, which is Current Assets / Current Liabilities. Hence, Current Assets = Current Ratio * Current Liabilities = 1.4 * $365,000 = $511,000.
• Subtracting quick assets from current assets gives us the inventory value: Inventory = Current Assets - Quick Assets = $511,000 - $310,250 = $200,750.
• Finally, to find the cost of goods sold, we multiply the inventory turnover ratio by the inventory value: Cost of Goods Sold = Inventory Turnover * Inventory = 5.8 * $200,750 = $1,164,350.

In summary, the cost of goods sold for Montcalm Corp. is calculated to be $1,164,350.