Question

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

Answer 1

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