Question

Thompson TV and Appliance reported the following in its 2021 financial statements: 2021 Sales $ 439,000 Cost of goods sold: Inventory, January 1 78,000 Net purchases 326,000 Goods available for sale 404,000 Inventory, December 31 95,000 Cost of goods sold 309,000 Gross profit $ 130,000 Thompson's 2021 inventory turnover ratio is:___________. (Round your answer to two decimal places.)a. 4.62.b. 3.25.c. 3.57.d. 5.08.

Answer 1

c. 3.57

Step-by-step explanation:

Inventory turnover ratio is computed as;

= Cost of goods sold ÷ Average inventory

Given that;

Cost of goods sold = $309,000

Average inventory = Beginning inventory + Ending inventory / 2

= $79,000 + $95,000 / 2

= $85,000

Inventory turnover ratio = $309,000 ÷ $86,500

Inventory turnover ratio = 3.57