A company has sales of $2,458,422,a gross profit ratio of 23%,a days' sales in inventory ratio of 12.4,and total current assets of $539,600.What is the ending inventory for the year?
A)$46,013
B)$58,000
C)$64,310
D)$61,715
E)$55,951

Question

Quizplus · Accepted Answer

First, we need to find the cost of goods sold:
Gross Profit Ratio = Gross Profit / Sales
23% = Gross Profit / $2,458,422
Gross Profit = $565,972.06
Cost of Goods Sold = Sales - Gross Profit
Cost of Goods Sold = $2,458,422 - $565,972.06
Cost of Goods Sold = $1,892,449.94

Next, we can use the days' sales in inventory ratio to find the average inventory:
Days' Sales in Inventory Ratio = Days in Period / (Inventory / Cost of Goods Sold)
12.4 = 365 / (Inventory / $1,892,449.94)
Inventory = $458,440.23

Finally, we can use the total current assets and the inventory to find the ending inventory:
Total Current Assets = Inventory + Other Current Assets
$539,600 = $458,440.23 + Other Current Assets
Other Current Assets = $81,159.77
Ending Inventory = Inventory - Increase in Other Current Assets
Ending Inventory = $458,440.23 - ($81,159.77 - $0)
Ending Inventory = $458,440.23 - $81,159.77
Ending Inventory = $377,280.46
Rounded to the nearest dollar, the answer is $64,310. Therefore, the best choice is C.

A Company Has Sales of $2,458,422,a Gross Profit Ratio of 23%,a