Ottawa, Inc. provides the following dа ta: 2019 2018 Cash $23,000 $22,000 Accounts Receivable, Net 37,000 37,000 Merchandise Inventory 55,000 25,000 Property, Plant, and Equipment, Net 127,000 96,000 Total Assets $242,000 $180,000 For the year ending December 31, 2019: Net Credit Sales $300,000 Cost of Goods Sold (170,000) Gross Profit $130,000 Calculate the days' sales in inventory for 2019. (Use 365 days for any calculations. Round any intermediate calculations and your final answer to two decimal places.)

Question

Business

Aleah Donovan

21 January, 18:35

Ottawa, Inc. provides the following dа ta: 2019 2018 Cash $23,000 $22,000 Accounts Receivable, Net 37,000 37,000 Merchandise Inventory 55,000 25,000 Property, Plant, and Equipment, Net 127,000 96,000 Total Assets $242,000 $180,000 For the year ending December 31, 2019: Net Credit Sales $300,000 Cost of Goods Sold (170,000) Gross Profit $130,000 Calculate the days' sales in inventory for 2019. (Use 365 days for any calculations. Round any intermediate calculations and your final answer to two decimal places.)

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Answers (1)

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Brutus · Answer 1

The days' sales in inventory for 2019 is 85.88 days

Explanation:

For computing the days' sales in inventory first we have to compute the inventory turnover ratio.

Inventory turnover ratio = Cost of goods sold : average inventory

where,

Average inventory = (Opening balance of inventory + ending balance of inventory) : 2

= ($25,000 + $ 55,000) : 2

= $40,000

And, the cost of good sold is $170,000

Now put these values to the above formula

So, the answer would be equal to

= $170,000 : $40,000

= 4.25 times

Now days sales inventory = Total number of days in a year : inventory turnover ratio

= 365 days : 4.25 times

= 85.88 days