Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000. Cost of goods sold amounted to $870,000 in Year 2. The company's average sale period for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) 230.1 days
B) 51.2 days
C) 57.0 days
D) 32.3 days

Question

Quizplus · Accepted Answer

We can use the formula:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

And then use the formula:

Average Sale Period = (Average Inventory / Cost of Goods Sold) * 365

To find the average sale period.

Plugging in the values, we get:

Average Inventory = ($150,000 + $122,000) / 2 = $136,000 
Average Sale Period = ($136,000 / $870,000) * 365 = 57.04 days

Rounding to the nearest tenth, we get an average sale period of 57.0 days, which is closest to answer choice C.

Pascarelli Corporation's Inventory at the End of Year 2 Was