Selected data pertaining to Lore Co. for the calendar year 20X4 is as follows: What was the inventory turnover for 20X4?

Question

Selected data pertaining to Lore Co. for the calendar year 20X4 is as follows:  What was the inventory turnover for 20X4?

Quizplus · Accepted Answer

Choice "C" is correct. Inventory turnover equals cost of goods sold divided by average inventory. Beginning inventory ($6,000) plus purchases ($24,000) less ending inventory equals cost of goods sold ($18,000). Thus, ending inventory equals $12,000 and inventory turnover = $18,000 / [($6,000 + $12,000)/2] = 2.0. Choice "A" is incorrect. Inventory turnover equals cost of goods sold divided by average inventory. Choice "B" is incorrect. Cost of goods sold should be divided by average inventory, not by ending inventory. Choice "D" is incorrect. Cost of goods sold should be divided by average inventory, not by beginning inventory.

Selected Data Pertaining to Lore Co