A company's January 1 balance in Merchandise Inventory is $40,000. The December 31 balance is $35,000. Cost of goods sold is $220,000. The company's inventory turnover is

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as the cost of goods sold divided by the average inventory for the period.

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

Average inventory = ($40,000 + $35,000) / 2 = $37,500

Inventory turnover = $220,000 / $37,500 = 5.87 to 1

Therefore, the answer is C) 5.87 to 1.

A Company's January 1 Balance in Merchandise Inventory Is $40,000