Question

In: Accounting

The company's merchandise inventory turnover for 200B was

The following information pertains to Batalla Company for 200B:

Inventory at December 31, 200B 16,000
Purchases of merchandise, all on credit 72,000
Cost of goods sold 80,000

The company's merchandise inventory turnover for 200B was 

a. 4.0 months

b. 10.0 times

c. 4.0 times

d. 3.60 months

Solutions

Expert Solution

Step 1: Computation of Beginning Inventory

Cost of goods sold 80,000
Add: Inventory, December 31, 200B 16,000
Total 96,000
Less: Purchases 72,000
Merchandise inventory, January 31, 200B 24,000

 

Step 2: Compute for the Average Inventory

Average Inventory = (24,000 + 16,000)/2

                              = 20,000

 

Step 3: Compute for the Merchandise Inventory Turnover

Merchandise Inventory Turnover = Cost of Goods Sold/Average Inventory

                                  = 80,000/20,000

                                  = 4.0 times


Answer: C. 4.0 times

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