Question

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The following information was available for Waterway Company at December 31, 2018: beginning inventory $107000; ending...

The following information was available for Waterway Company at December 31, 2018: beginning inventory $107000; ending inventory $61000; cost of goods sold $6132000; and sales $1440000. Waterway’s days in inventory in 2018 was 3.6 days. 21.3 days. 6.4 days. 5.0 days.

Expert Solution

Information provided:

Beginning inventory= $107,000

Ending inventory= $61,000

Cost of goods sold= $6,132,000

Sales= $144,000

Formula for computing number of days of inventory:

Number of days of inventory= 365/Inventory turnover

Inventory turnover is calculated using the below formula:

Inventory Turnover= Cost of Goods Sold/Average Inventory

= $6,132,000/ ($107,000 + $61,000/2)

= $6,132,000/ $84,000

= 73 times.

Days of inventory= 365/ 73

= 5 days.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.

jeff jeffy answered 10 months ago

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