Zin Company repoted cost of goods sold of $1,500,000 last year.The company's beginning inventory balance was $110,000 and the ending inventory balance was $86,000.How many days will it take the company to sell off all of its inventory?

Question

Quizplus · Accepted Answer

Cost of goods sold (COGS) can be calculated as follows:

COGS = Beginning inventory + Purchases - Ending inventory

Where, Purchases = Cost of goods sold + Ending inventory - Beginning inventory

Plugging in the given values, we get:

$1,500,000 = $110,000 + Purchases - $86,000
Purchases = $1,476,000

Average inventory can be calculated as:

Average inventory = (Beginning inventory + Ending inventory) / 2
= ($110,000 + $86,000) / 2 
= $98,000

Inventory turnover can be calculated as:

Inventory turnover = Cost of goods sold / Average inventory 
= $1,500,000 / $98,000 
= 15.31

Days in inventory can be calculated as:

Days in inventory = 365 days / Inventory turnover 
= 365 days / 15.31 
= 23.86 days

Therefore, the closest answer choice to the calculated value is C) 20.9 days.

Zin Company Repoted Cost of Goods Sold of $1,500,000 Last