Question

The following information was available for Paul Company at December 31, 2020: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $968,000; and sales $1,360,000. Paul’s inventory turnover in 2020 wasa21.5 days.b.26.4 days.c.30.2 days.d.33.8 days.

Answer 1

Option (c) is correct.

Step-by-step explanation:

Given that,

Beginning inventory = $90,000;

Ending inventory = $70,000;

Cost of goods sold = $968,000

Sales = $1,360,000

Average inventor:

= (Beginning inventory + Ending inventory) ÷ 2

= ($90,000 + $70,000) ÷ 2

= $160,000 ÷ 2

= $80,000

Inventory turnover is the ratio of cost of goods sold and average inventory.

Paul’s inventory turnover in 2020:

= Cost of goods sold ÷ Average Inventory

= $968,000 ÷ $80,000

= 12.1 times

Days in inventory:

= 365 days ÷ Inventory turnover ratio

= 365 days ÷ 12.1

= 30.16 or 30.2 days