The following balance sheet information is provided for Gaynor Company: $\begin{array}{lrr}
\text { Assets } & \text { Year 2 } &{\text { Year 1 }} \
\text { Cash } & \$ 4,000 & \$ 2,000 \
\text { Accounts receivable } & 15,000 & 12,000 \
\text { Inventory } & \$ 35,000 & \$ 38,000
\end{array}$ Assuming Year 2 cost of goods sold is $153,300, what is the company's inventory turnover?
A) 4.0 times
B) 4.4 times
C) 4.2 times
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as Cost of Goods Sold divided by Average Inventory. For Year 2, the cost of goods sold is $153,300. The average inventory is calculated as (Beginning Inventory + Ending Inventory) / 2 = ($38,000 + $35,000) / 2 = $36,500. Thus, inventory turnover = $153,300 / $36,500 = 4.2 times.

The Following Balance Sheet Information Is Provided for Gaynor Company