During Year 2, Lamar Corporation purchased $600,000 of merchandise inventory.The cost of sales for year 2 was $660,000 and the ending merchandise inventory at December 31, Year 2 was $60,000.What was the inventory turnover for Year 2?
A)8.0
B)7.3
C)6.6
D)6.0
E)6.7

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as Cost of Goods Sold (COGS) / Average Inventory. For Year 2, COGS is $660,000. To find the average inventory, we need the beginning inventory, which can be calculated as: Beginning Inventory = (COGS + Ending Inventory) - Purchases = ($660,000 + $60,000) - $600,000 = $120,000. Thus, Average Inventory = ($120,000 + $60,000) / 2 = $90,000. Therefore, Inventory Turnover = $660,000 / $90,000 = 7.3.

During Year 2, Lamar Corporation Purchased $600,000 of Merchandise Inventory