Question

The following information came from the income statement of the Wilkens Company at December 31, 2017: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. What is Wilkens' inventory turnover ratio for 2017

Answer 1

6

Step-by-step explanation:

The average turnover ratio is calculated using the formula.

average turnover ratio = Costs of goods sold

Average inventories

For Wilkens Company, Costs of goods sold will be sales revenue - the gross profit

= $1,800,000- $600,000 = $1,200,000

Average inventory = Beginning stock + Ending stock /2

= $160,000 + $240,000 /2

=$200

Average turnover ratio = $1,200,000

$200,000

=6