Calculate the value of cost of goods sold for Molson's Brewing Company given the following information: Current liabilities = $340,000; Quick ratio = 1.8; Inventory turnover = 4.0; Current ratio = 3.3.
A) $2,040,000
B) $3,060,000
C) $3,999,999
D) $4,180,222
E) $5,888,100

Question

Quizplus · Accepted Answer

To find the cost of goods sold (COGS) for Molson's Brewing Company, we first need to calculate the inventory and then use the inventory turnover ratio. The current ratio is given as 3.3, and the formula for the current ratio is Current Assets / Current Liabilities. So, Current Assets = Current Liabilities * Current Ratio = $340,000 * 3.3 = $1,122,000. The quick ratio is given as 1.8, and the formula for the quick ratio is (Current Assets - Inventory) / Current Liabilities. Rearranging this formula to solve for Inventory gives us Inventory = Current Assets - (Quick Ratio * Current Liabilities) = $1,122,000 - (1.8 * $340,000) = $1,122,000 - $612,000 = $510,000. The inventory turnover ratio is given as 4.0, and the formula for inventory turnover is COGS / Inventory. Rearranging this formula to solve for COGS gives us COGS = Inventory * Inventory Turnover = $510,000 * 4 = $2,040,000.

Calculate the Value of Cost of Goods Sold for Molson's