Question

Chapter 05 Homework i Saved The following is information for Palmer Co. Cost of goods sold Ending inventory Year 3 $638,825 96,900 Year 2 $ 421,650 87,250 Year 1 $386,300 92,000 points Use the above information to compute inventory turnover for year 3 and year 2, and its days' sales in inventory at December 31, year 3 and year 2. eBook Hint Print (a) Use the above information to compute inventory turnover for year 2, and its days' sales in inventory at December 31, year 2. Numerator 1 Denominator = Ratio Inventory turnover Days' sales in inventory (b) Use the above information to compute inventory turnover for year 3, and its days' sales in inventory at December 31, year 3. Numerator 1 Denominator = Ratio Inventory turnover Days' sales in inventory References

Answer 1

Inventory turnover ratio = cost of goods sold / ((Beginning inventory + Ending inventory) /2)

	Year 2	Year 3
Cost of Goods sold	$ 421,650	$ 638,825
Beginning Inventory	$    92,000	$    87,250
Ending Inventory	$    87,250	$    96,900
Inventory Turnover Ratio	4.70460	6.93809

Days sales in inventory = Ending Inventory / cost of goods sold *365

	Year 2	Year 3
Ending inventory	$    96,900	$    87,250
Cost of goods sold	$ 421,650	$ 638,825
Days sales in inventory	83.88118	49.85129

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