Asked by Bryce Burns on May 14, 2024
Verified
The following information was obtained from the accounting records of the Guerra Corporation for 2010: Cost of goods sold $3,600,000 Merchandise inventory: January 1400,000 December 31460,000\begin{array}{ll}\text { Cost of goods sold }&\$3,600,000\\\text { Merchandise inventory: }\\&\text { January } 1 & 400,000 \\&\text { December } 31 & 460,000\end{array} Cost of goods sold Merchandise inventory: $3,600,000 January 1 December 31400,000460,000
Assuming a business year consisting of 365 days, what was Guerra's number of days' sales in inventories for 2010?
A) 46.6 days
B) 43.6 days
C) 40.6 days
D) 36.7 days
Merchandise Inventory
Products that a company holds in stock with the intent to sell as part of its business operations.
Cost of Goods Sold
Costs incurred directly from the production of goods a company markets, including both materials and workforce expenses.
Days' Sales
A financial ratio that measures the average number of days a company takes to convert its inventory into sales.
- Utilize and interpret cash flow ratios and turnover metrics to gauge company’s operational efficiency.
Verified Answer
AM
Anjulie McFarlandMay 17, 2024
Final Answer :
B
Explanation :
The number of days' sales in inventories is calculated using the formula: Days of Inventory=(Average InventoryCost of Goods Sold)×365\text{Days of Inventory} = \left(\frac{\text{Average Inventory}}{\text{Cost of Goods Sold}}\right) \times 365Days of Inventory=(Cost of Goods SoldAverage Inventory)×365 . The average inventory is (400,000+460,000)2=430,000\frac{(400,000 + 460,000)}{2} = 430,0002(400,000+460,000)=430,000 . Thus, Days of Inventory=(430,0003,600,000)×365≈43.6\text{Days of Inventory} = \left(\frac{430,000}{3,600,000}\right) \times 365 \approx 43.6Days of Inventory=(3,600,000430,000)×365≈43.6 days.
Learning Objectives
- Utilize and interpret cash flow ratios and turnover metrics to gauge company’s operational efficiency.
Related questions
Refer to Exhibit 6-2 ...
The Following Codes Are Used to Compute the Ratios Below \(\quad ...
Calculate Gross Profit Given the Following Information: Accounts Receivable = ...
Data from Dalpiaz Corporation's Most Recent Balance Sheet and Income ...
Dilisio Corporation Has Provided the Following Data ...