Question

The following information is available for Starr Company at December 31, 2003: Beginning inventory $ 80,000 Ending inventory 120,000 Cost of goods sold 900,000 Sales 1,200,000 Starr's inventory turnover in 2004 is __________.

Answer 1

The inventory turnover for Starr Company in 2004 is calculated by dividing the cost of goods sold by the average inventory. With a COGS of $900,000 and an average inventory of $100,000, the inventory turnover is 9 times.

Step-by-step explanation:

The subject of the question is inventory turnover calculation, which is an important aspect of business and finance. Specifically, the question is asking for the calculation of the inventory turnover for Starr Company in 2004. Inventory turnover is a ratio that shows how many times a company has sold and replaced inventory during a certain period of time.

To calculate inventory turnover, we use the formula: Inventory Turnover = Cost of Goods Sold / Average Inventory. The average inventory is calculated by adding the beginning inventory to the ending inventory and then dividing by two. In this case, the beginning inventory is $80,000 and the ending inventory is $120,000, so the average inventory would be ($80,000 + $120,000)/2 = $100,000. Given that the cost of goods sold (COGS) is $900,000, the inventory turnover would be $900,000 / $100,000 = 9 times.