Question

15. Anthony Thomas Candies (ATC) reported the following financial data for 2018 and 2017: 2018 2017 Sales $ 324,000 $ 297,000 Sales returns and allowances 8,600 5,700 Net sales $ 315,400 $ 291,300 Cost of goods sold: Inventory, January 1 59,000 29,000 Net purchases 145,000 128,000 Goods available for sale 204,000 157,000 Inventory, December 31 66,000 59,000 Cost of goods sold 138,000 98,000 Gross profit $ 177,400 $ 193,300 The average days inventory for ATC (rounded) for 2018 is: Multiple Choice a. 225 days. b. Less than 100 days. c. 165 days. d. 225 days.

Answer 1

Average Days Inventory = Average Inventory / Cost of goods sold per day

Average Inventory = [Beginning Inventory + Ending Inventory] / 2

= [$59,000 + 66,000] / 2

= $62,500

Cost of goods sold per day = Cost of goods sold / 365 Days

= $138,000 / 365 Days

= $378.08 per day

Therefore, Average Days Inventory = Average Inventory / Cost of goods sold per day

= $62,500 / $378.08

= 165 Days

“The Average Days Inventory for ATC for 2018 is (c). 165 Days”