Question

Brief Exercise 13-12 a1-a2 (Part Level Submission) The following data were taken from the income statements of Crane Company. 2020 2019 Sales revenue Beginning inventory Purchases Ending inventory $6,385,000 934,000 4,646,200 1,040,000 $6,188,000 854,000 4,997,000 934,000 (a1) Compute the inventory turnover for each year. (Round answers to 1 decimal place, e.g. 12.5.) 2020 2019 Inventory turnover times times

Answer 1

Answer of Part a1:

For 2020:

Average Inventory = (Beginning Inventory + Ending Inventory)/2
Average Inventory = ($934,000 + $1,040,000) /2
Average Inventory = $987,000

Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory
Cost of Goods Sold = $934,000 + $4,646,200 - $1,040,000
Cost of Goods Sold = $4,540,200

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $4,540,200 / $987,000
Inventory Turnover = 4.6 times

For 2019:

Average Inventory = (Beginning Inventory + Ending Inventory)/2
Average Inventory = ($854,000 + $934,000) /2
Average Inventory = $894,000

Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory
Cost of Goods Sold = $854,000 + $4,997,000 - $934,000
Cost of Goods Sold = $4,917,000

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $4,917,000 / $894,000
Inventory Turnover = 5.5 times

Answer of Part 2:

For 2020:

Days in Inventory = 365 days / Inventory Turnover
Days in Inventory = 365 /4.6
Days in Inventory = 79.3 days

For 2019:

Days in Inventory = 365 days / Inventory Turnover
Days in Inventory = 365 /5.5
Days in Inventory = 66.4 days