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xCengageNOWv2| Online x ocator assignment-take∈ progress-f- ?| P agenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker-assignments&tak; tSession eBook Bi Show Me How Calculator Inventory Turnover and Days Sales in Inventory The following financial statement data for years ending December 31 for Holland Company are shown below. 20Y4 20Y3 Cost of merchandise sold $1,276,040 812,490 Inventories: $227,760 327,040 $159,140 Beginning of year End of year 227,760 a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place. Inventory Turnover 20Y4 20Y3 answers to one decimal õetermine the days sales in inventory for 20y4 and 2013. Assume 365 days a year. Round interim caicultions and fnal b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations Days' Sales in Inventory 20Y4 days 20Y3 days ry turnover and the days sales in inventory from 2013 to 20Y4 indicate a favorable or an unfevorable trend?Explanation / Answer
a. Inventory turnover 20Y4 4.6 20Y3 6.6 Working: Inventory turnover = Cost of goods sold/Average Inventory So, Inventory turnover for: 20Y4 = $ 1,276,040 / ((227760+327040)/2) = $ 1,276,040 / $ 277,400 = 4.6 20Y3 = $ 812,490 / ((159140+227760)/2) = $ 1,276,040 / $ 193,450 = 6.6 b. Days sales in inventory 20Y4 79.3 Days 20Y3 55.3 Days Working: Days sales in inventory = Days in a year/Inventory turnover So, Days sales in inventory for: 20Y4 = 365 / 4.60 = 79.3 20Y3 = 365 / 6.60 = 55.3 c. Unfavorable trend First higher inventory turnover ratio is better for company and second lower days sales in inventory is better as it shows mumber of days it take to sale a inventory. and minimum number of days is the better.
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