Question

Freiman Corporation's most recent balance sheet and income statement appear below:

Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
	Year 2			Year 1
Assets
Current assets:
Cash	$	160		$	120
Accounts receivable, net		220			240
Inventory		120			130
Prepaid expenses		40			40
Total current assets		540			530
Plant and equipment, net		700			700
Total assets	$	1,240		$	1,230
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	130		$	150
Accrued liabilities		90			90
Notes payable, short term		60			70
Total current liabilities		280			310
Bonds payable		280			290
Total liabilities		560			600
Stockholders' equity:
Common stock, $2 par value		100			100
Additional paid-in capital		200			200
Retained earnings		380			330
Total stockholders' equity		680			630
Total liabilities & stockholders' equity	$	1,240		$	1,230

Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account)	$	1,310
Cost of goods sold		780
Gross margin		530
Selling and administrative expenses		359
Net operating income		171
Interest expense		35
Net income before taxes		136
Income taxes (30%)		41
Net income	$	95

The inventory turnover for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-10-04

Multiple Choice

• 58.5 days

• 33.4 days

• 217.3 days

• 56.2 days

Answer 1

Inventory Turnover = Cost of Goods Sold/Average inventory

= 780,000/[(120,000+130,000)/2]

= 780,000/125,000

= 6.24 times

Days to sell

= 365/6.24

= 58.5 days