Question

Use the below information to answer the following question.

Income Statement
For the Year
Net sales $631,000
COGS 442,220
Depreciation 28,100

EBIT $160,700
Interest 14,900

Taxable income $145,800
Taxes 49,600

Net income $96,200



Balance Sheet
Beginning of Year End of Year
Cash $ 38,200 $43,700
Accounts receivable 91,400 86,150
Inventory 203,900 214,600
Net fixed assets 516,100 537,950

Total assets $849,600 $882,400

Accounts payable $136,100 $104,300
Long-term debt 329,500 298,200
Common stock ($1 par value) 75,000 82,000
Retained earnings 309,000 397,900

Total Liab. & Equity $849,600 $882,400



How many days on average does it take to sell the inventory? (Use year-end values)

Answer 1

To calculate the average days to sell the inventory, also known as Inventory Days on Hand, you can divide the year-end Cost of Goods Sold (COGS) by the year-end inventory value, then divide 365 days by the resulting Inventory Turnover Ratio to get approximately 177 days.

Step-by-step explanation:

To determine the average days it takes to sell the inventory, also known as the Inventory Days on Hand, we use the year-end inventory values and calculate the Inventory Turnover Ratio first, then use that ratio to find the average days to sell the inventory.

The Inventory Turnover Ratio is calculated as Cost of Goods Sold (COGS) divided by the average inventory for the period. However, since we only have the year-end inventory value, we'll use that for our calculation. The Inventory Turnover Ratio is $442,220 COGS divided by $214,600 year-end inventory, which gives us approximately 2.06.

Next, we calculate the average days to sell the inventory by dividing the number of days in the year (365) by the Inventory Turnover Ratio. So, the average days on hand is 365 days divided by 2.06, which equals approximately 177 days.