Question

A company reports the following amounts for 2019. Calculate the cost of goods sold, the inventory turnover ratio, and the average days in inventory for 2019.

Answer 1

The cost of goods sold is calculated by subtracting the ending inventory from the beginning inventory and adding any purchases made during the year. The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory, and the average days in inventory is calculated by dividing 365 by the inventory turnover ratio.

Step-by-step explanation:

The cost of goods sold (COGS) is calculated by subtracting the ending inventory from the beginning inventory and adding any purchases made during the year. This formula is represented as COGS = Beginning Inventory + Purchases - Ending Inventory.

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. The formula is Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.

The average days in inventory is calculated by dividing 365 (or the number of days in the year) by the inventory turnover ratio. The formula is Average Days in Inventory = 365 / Inventory Turnover Ratio.