Your firm has inventory of $188,000, cost of goods sold of $522,000, and accounts receivable of $214,000. What is your inventory conversion period?

Question

Quizplus · Accepted Answer

Inventory Conversion Period = (Average Inventory / Cost of Goods Sold) x 365

First, we need to calculate the average inventory:

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

We don't have the beginning inventory, but we know that the ending inventory is included in the inventory balance of $188,000.

Assuming that the beginning inventory balance was equal to the ending inventory balance, the average inventory then would be:

Average Inventory = ($188,000 + $188,000) / 2 = $188,000

Substituting the values into the formula, we get:

Inventory Conversion Period = ($188,000 / $522,000) x 365 = 131 days

Therefore, the answer is D, 131 days.

Your Firm Has Inventory of $188,000, Cost of Goods Sold