Does anybody get annoyed when you calculate WRONG and it's not an answer choice? For example, I had my COGS calc backwards (300,000+700,000-100,000 = 900,000/200,000 =4 .5) but 4.5 is not an answer choice. I know its a good problem, but its annoying
The following information was taken from Baxter Department Store’s financial statements:
Inventory at January 1 $100,000
Inventory at December 31 300,000
Net sales 2,000,000
Net purchases 700,000
What was Baxter’s inventory turnover for the year ending December 31?
A. 2.5
Answer (A) is correct.
Inventory turnover is equal to cost of goods sold divided by average inventory. Cost of goods sold is equal to net purchases minus the annual increase in inventory. Thus, it equals $500,000 [$700,000 net purchases – ($300,000 – $100,000)]. Average inventory is $200,000 [($100,000 + $300,000) ÷ 2]. Inventory turnover is therefore 2.5 ($500,000 ÷ $200,000).
B. 3.5
C. 5
D. 10
AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)
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