Condensed financial data are presented below for the Phoenix Corporation:
$\begin{array}{lrr}&2014&2013\
\text { Accounts receivable } & \$ 267,500 & \$ 230,000 \
\text { Inventory } & 312,500 & 257,500 \
\text { Total current assets } & 670,000 & 565,000 \
\text { Intangible assets } & 50,000 & 60,000 \
\text { Total assets } & 825,000 & 695,000 \
\text { Current liabilities } & 252,500 & 200,000 \
\text { Long-term liabilities } & 77,500 & 75,000 \
\text { Sales } & 1,640,000 & \
\text { Cost of goods sold } & 982,500 & \
\text { Interest expense } & 10,000 & \
\text { Income tax expense } & 77,500 & \
\text { Net income } & 127,500 & \
\text { Cash flow from operations } & 71,000 & \
\text { Cash flow from investing activities } & (6,000) & \
\text { Cash flow from financing activities } & (62,500) & \
\text { Tax rate } & 30 \% &
\end{array}$
-The days inventory held for 2014 is (rounded):
A)96 days.
B)106 days.
C)116 days.
D)138 days.

Question

Quizplus · Accepted Answer

The days inventory held is calculated as $ \frac{\text{Inventory}}{\text{Cost of Goods Sold}} \times 365 $. For 2014, this is $ \frac{312,500}{982,500} \times 365 \approx 116 $ days. However, the correct formula should actually be $ \frac{\text{Inventory}}{\text{Cost of Goods Sold per day}} $, which is $ \frac{312,500}{\frac{982,500}{365}} \approx 116 $. The mistake in the explanation led to the wrong choice being initially selected. The correct calculation indeed results in approximately 116 days, aligning with choice C, not B. This correction addresses the calculation error.

Condensed Financial Data Are Presented Below for the Phoenix Corporation