[rafiv900]

During year 2, Rand Co. purchased $960,000 of inventory. The COGS for year 2 was $900,000, and the ending inventory @ 12/31/ year 2 was $180,000. What was the inventory turnover for year 2?

Solution:

First we need to calculate the Beg. Inventory. This is what I don’t understand. Why we need to sum the ending inventory $180,000 when it is always in negative? and subtract the purchases $960,000.:

COGS 900,000 + Ending Inventory $180,000 = Cost of goods Available for sale $1,080,000 – Purchases 960,000 Equals Beginning Inventory $120,000.

Avg Inventory is 150,000 (120,000 + 180,000) / 2. And inventory Turnover is 6.0 Times (900,000 / 150,000)

Journey Started - June 2015
FAR - TBD
AUD - January 20, 2016
BEC - TBD
REG - TBD

[WaivingMyHands_ALOT]

Make a T chart. Easiest way to get these questions right.

___________________________________

Beginning Inventory | COGS

+ Purchases |

|

|

|

|

|

___________________________________

Ending Inventory

Beginning Inventory + Purchases – COGS = Ending Inventory

…rearrange to solve for Beginning Inventory

Ending Inventory – Purchases + COGS = Beginning Inventory

180,000 – 960,000 + 900,000 = 120,000

Beginning Inventory = $120,000

AUD 99
BEC 96
FAR 94
REG 96

[WaivingMyHands_ALOT]

Whoops…my T chart got messed up. Basically beginning inventory and purchases are on the left (these are whats coming in to your inventory account), and COGS is on the right (whats going out of your inventory account).

AUD 99
BEC 96
FAR 94
REG 96

[rafiv900]

Thank You

Journey Started - June 2015
FAR - TBD
AUD - January 20, 2016
BEC - TBD
REG - TBD

[Author]

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