Corona Company's balance sheet accounts follow:

What is Corona Company's inventory turnover ratio for 2011 assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively?

Question

Corona Company's balance sheet accounts follow: 
 
What is Corona Company's inventory turnover ratio for 2011 assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively?

Quizplus · Accepted Answer

The formula for inventory turnover ratio is:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

To calculate the cost of goods sold, we can use the formula:

Cost of Goods Sold = Net Sales - Gross Profit

So, Cost of Goods Sold = $1,236,783 - $927,587 = $309,196

To calculate the average inventory, we need to take the inventory at the beginning of the period and add it to the inventory at the end of the period and divide by 2.

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

Average Inventory = ($68,219 + $93,085) / 2 = $80,652

Now we can calculate the inventory turnover ratio:

Inventory Turnover Ratio = $309,196 / $80,652 = 3.84 ≈ 3.65

Therefore, the answer is D, 3.65.

Corona Company's Balance Sheet Accounts Follow