Selected information from the accounting records of Ellison Manufacturing Company follows:

What is the number of days' sales in average inventories for the year?

Question

Selected information from the accounting records of Ellison Manufacturing Company follows:

What is the number of days' sales in average inventories for the year?

Quizplus · Accepted Answer

Average inventory = (beginning inventory + ending inventory) / 2
= ($158,000 + $126,000) / 2
= $142,000

Cost of goods sold = Net sales - Gross profit
= $1,080,000 - ($580,000 - $254,000)
= $754,000

Number of days' sales in average inventories = (365 / inventory turnover)
= (365 / (cost of goods sold / average inventory))
= (365 / ($754,000 / $142,000))
= 94.9 days

Selected Information from the Accounting Records of Ellison Manufacturing Company