The following information pertains to Ortiz 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 Ortiz?
A)3,2 times
B)5.5 times
C)11 times
D)0.18 times

Question

The following information pertains to Ortiz 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 Ortiz?
A)3,2 times 
B)5.5 times 
C)11 times 
D)0.18 times

Quizplus · Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory 
Cost of goods sold = $620,000 
Average inventory = ($120,000 beginning inventory + $80,000 ending inventory) / 2 = $100,000 
Inventory turnover = $620,000 / $100,000 = 6.2 times (rounded to one decimal place), which is closest to option B, 5.5 times.

The Following Information Pertains to Ortiz Company