Asked by Manal Al-Hashmi on Jun 18, 2024
Verified
On January 1,2041 Creek Company's beginning inventory was $500,000.During 2014 the company purchased $2,400,000 of additional inventory,and on December 31,2014 Creek's ending inventory was $300,000.
Required:
What was Creek's inventory turnover for 2014?
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a specific period.
Beginning Inventory
The initial quantity of goods available for sale at the start of an accounting period.
Ending Inventory
The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting sold goods.
- Pinpoint and scrutinize the influence of inventory handling approaches on a firm's turnover figures and general financial standing.
Verified Answer
Feedback:Cost of goods sold = $500,000 + $2,400,000 - $300,000 = $2,600,000
Average inventory = ($500,000 + $300,000)÷ 2 = $400,000
Inventory turnover = Cost of goods sold ÷ average inventory = $2,600,000 ÷ $400,000 = 6.5 times.
Learning Objectives
- Pinpoint and scrutinize the influence of inventory handling approaches on a firm's turnover figures and general financial standing.
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