Question

Use the following information to answer items 4-7: For its most recent year a company had Sales (all on credit) of $830,000 and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were $80,000 and its Inventory was s100,000. At the end of the year its Accounts Receivable were $86,000 and its Inventory was $110,000.

 4. The inventory turnover ratio for the year was .

 5. The accounts receivable turnover ratio for the year was

 6. On average how many days of sales were in Accounts Receivable during the year?

 7. On average how many days of sales were in Inventory during the year?

Answer 1

4)

Inventory turnover ratio = Cost of goods sold Average inventory

$525000 Inventory turnover ratio = ($100000+ $110000)

Inventory turnover ratio = 5 times per year

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5)

Net sales on account Accounts receivable turnover ratio = 7 Average account receivable

$830000 Accounts receivable turnover ratio = ($80000 + $86000)

Accounts receivable turnover ratio = 10

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6)

Average accounts receivable Days sales in accounts receivable = - Average daily sales

$80000 + $86000) Days sales in accounts receivable = $830000 365

Days of sales in accounts receivable = 36.5 days

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7)

Days of sales in inventory = Average inventory Average daily cost of goods sold

$100000+ $110000 Days of sales in inventory = $525000 365

Days of sales in inventory during the year = 73 days