The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the inventory turnover for this company?
A) 2 times
B) 2.25 times
C) 1 time
D) .44 times

Question

The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.  What is the inventory turnover for this company?
A) 2 times 
B) 2.25 times 
C) 1 time 
D) .44 times

Quizplus · Accepted Answer

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory. Using the information provided in the balance sheet, we can calculate that the cost of goods sold is $360,000 ($700,000 + $600,000 - $940,000). The average inventory is $160,000 (($100,000 + $220,000)/2). Therefore, the inventory turnover is 2.25 times ($360,000/$160,000).

The Following Information Pertains to Unique Company