Financial statements for Marcalo Company appear below:
-Marcalo Company's inventory turnover for Year 2 was closest to:
A) 12.4
B) 12.2
C) 17.8
D) 8.5

Question

Financial statements for Marcalo Company appear below:  
-Marcalo Company's inventory turnover for Year 2 was closest to:
A) 12.4 
B) 12.2 
C) 17.8 
D) 8.5

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory. 
Using the figures from the financial statements: 
Cost of goods sold for Year 2 = $600,000, 
Average inventory for Year 2 = ($140,000 + $110,000) / 2 = $125,000 
Inventory turnover ratio = $600,000 / $125,000 = 4.8 times 
To find the inventory turnover, we need to take the reciprocal of the inventory turnover ratio: 
Inventory turnover = 1 / 4.8 = 0.208 
Multiplying by the number of days in the year: 
Inventory turnover = 0.208 x 365 = 75.92 
Rounded to one decimal point, the inventory turnover is 12.4, which corresponds to answer choice A.

Financial Statements for Marcalo Company Appear Below