Question

The Balance Sheet and Income Statement of the Company as of and for the twelve months ended December 31, 2020 shows the following information (in thousands):

Opening (i.e., beginning of year) and Ending balances

Accounts Receivable Opening $4,155 Ending. $5,155
Accounts Payable Opening $5,200 Ending $5,834
Inventory Opening $3,000 Ending $5,000
Sales on Credit (12months) 40,757 Cost of Goods Sold (COGS) (12 months) $28,744

Required:
Using this information, how many days are in the Inventory Conversion Period for the year (ROUND TO WHOLE DAY IF NECESSARY)?

Answer 1

50 days

Step-by-step explanation:

Inventory Conversion Period = Average inventory / Cost of goods sold * 360 days

Inventory Conversion Period = [($3,000+$5,000)/2] / $28,744 * 360

Inventory Conversion Period = $4,000/$28,744 * 360

Inventory Conversion Period = 0.1391594768 * 360

Inventory Conversion Period = 50.097411648

Inventory Conversion Period = 50 days

Therefore, inventory conversion period is 50 days.