The following information is available for Oakland Company: 2017 2016 Accounts receivable $ 360 , 000 $ 400 , 000 Inventory 340 , 000 400 , 000 Net credit sales 2 , 470 , 000 1 , 400 , 000 Cost of goods sold 1 , 850 , 000 1 , 060 , 000 Net income 300 , 000 170 , 000 \begin{array}{lrr} & 2017 & 2016\ ext { Accounts receivable } & \$ 360,000 & \$ 400,000 \ ext { Inventory } & 340,000 & 400,000 \ ext { Net credit sales } & 2,470,000 & 1,400,000 \ ext { Cost of goods sold } & 1,850,000 & 1,060,000 \ ext { Net income } & 300,000 & 170,000\end{array} Accounts receivable Inventory Net credit sales Cost of goods sold Net income 2017 $360 , 000 340 , 000 2 , 470 , 000 1 , 850 , 000 300 , 000 2016 $400 , 000 400 , 000 1 , 400 , 000 1 , 060 , 000 170 , 000 The inventory turnover ratio for 2017 isA) 6.7 times.B) 5.0 times.C) 5.4 times.D) 4.6 times.

Question

The following information is available for Oakland Company:   2017 2016  Accounts receivable  $ 360 , 000 $ 400 , 000  Inventory  340 , 000 400 , 000  Net credit sales  2 , 470 , 000 1 , 400 , 000  Cost of goods sold  1 , 850 , 000 1 , 060 , 000  Net income  300 , 000 170 , 000 \begin{array}{lrr} & 2017 & 2016\	ext { Accounts receivable }  &  \$ 360,000  &  \$ 400,000 \	ext { Inventory }  &  340,000  &  400,000 \	ext { Net credit sales }  &  2,470,000  &  1,400,000 \	ext { Cost of goods sold }  &  1,850,000  &  1,060,000 \	ext { Net income }  &  300,000  &  170,000\end{array}  Accounts receivable   Inventory   Net credit sales   Cost of goods sold   Net income  ​ 2017 $360 , 000 340 , 000 2 , 470 , 000 1 , 850 , 000 300 , 000 ​ 2016 $400 , 000 400 , 000 1 , 400 , 000 1 , 060 , 000 170 , 000 ​   The inventory turnover ratio for 2017 isA)  6.7 times.B)  5.0 times.C)  5.4 times.D)  4.6 times.

Alondra Cuevas · Accepted Answer

Final Answer : B, Explanation :  The inventory turnover ratio is calculated as Cost of Goods Sold divided by Average Inventory. For 2017, the Cost of Goods Sold is $1,850,000. The average inventory is calculated as the sum of the beginning and ending inventory divided by 2, which is ($400,000 + $340,000) / 2 = $370,000. Therefore, the inventory turnover ratio for 2017 is $1,850,000 / $370,000 = 5.0 times.

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