During the year, The Hill Company purchased $1,920,000 of inventory. The cost of goods sold for the year was $1,800,000 and the ending inventory at December 31 was $360,000. What was the inventory turnover for the year?

Question

Quizplus · Accepted Answer

Inventory turnover = Cost of goods sold / Average inventoryAverage inventory = (Beginning inventory + Ending inventory) / 2Beginning inventory is not given, so we cannot calculate the average inventory. However, we can use the fact that the inventory turnover is equal to the cost of goods sold divided by the average inventory to solve for the average inventory.Average inventory = Cost of goods sold / Inventory turnoverAverage inventory = $1,800,000 / 6Average inventory = $300,000Therefore, the inventory turnover is 6.

During the Year, the Hill Company Purchased $1,920,000 of Inventory