12. value 3.70 points Exercise 5-13 Inventory turnover and days\' sales in inven

Question

12. value 3.70 points Exercise 5-13 Inventory turnover and days' sales in inventory LO A3 The following is information for Palmer Co 2015 2014 2013 $ 563,825 $ 346,650 $311,300 Cost of goods sold Ending inventory 104,400 94,750 99,500 Required: Use the above information to compute inventory turnover for 2015 and 2014, and its days' sales in inventory at December 31, 2015 and 2014 (a) Use the above information to compute inventory turnover for 2014, and its days' sales in inventory at December 31, 2014 erator Denominator Ratio Inventory turnover Days' sales in inventory (b) Use the above information to compute inventory turnover for 2015, and its days' sales in inventory at December 31, 2015 Numerator Denominator Ratio Inventory turnover Days' sales in inventory

Explanation / Answer

A. Inventory turnover and days sales in inventory at December 31,2014.

Inventory Turnover = Cost of goods sold / [(Clsoing Inventory 2014 - Closing Inventory of 2013) /2]]

= $ 346,650 / [ ($ 94,750 + $ 99,500) / 2]

= $ 346,650 / [ $ 194,250 / 2 ]

= $ 346,650 / $ 97,125

= 3.57 Times

Day's Sales in Inventory = No of Days / Inventory Turnover

= 365 Days / 3.57 Times

= 102.24 Days

B. Inventory turnover and days sales in inventory at December 31,2015.

Inventory Turnover = Cost of goods sold / [(Clsoing Inventory 2015 - Closing Inventory of 2014) /2]]

= $ 563,825 / [ ($ 104,400 + $ 94,750) / 2]

= $ 563,825 / [ $ 199,150 / 2 ]

= $ 563,825 / $ 99,575

= 5.66 Times

Day's Sales in Inventory = No of Days / Inventory Turnover

= 365 Days / 5.66 Times

= 64.49 Days

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