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4 April, 17:23

The following information was available for Paul Company at December 31, 2020: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $968,000; and sales $1,360,000. Paul's inventory turnover in 2020 wasa21.5 days. b. 26.4 days. c. 30.2 days. d. 33.8 days.

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  1. 4 April, 17:38
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    Option (c) is correct.

    Explanation:

    Given that,

    Beginning inventory = $90,000;

    Ending inventory = $70,000;

    Cost of goods sold = $968,000

    Sales = $1,360,000

    Average inventor:

    = (Beginning inventory + Ending inventory) : 2

    = ($90,000 + $70,000) : 2

    = $160,000 : 2

    = $80,000

    Inventory turnover is the ratio of cost of goods sold and average inventory.

    Paul's inventory turnover in 2020:

    = Cost of goods sold : Average Inventory

    = $968,000 : $80,000

    = 12.1 times

    Days in inventory:

    = 365 days : Inventory turnover ratio

    = 365 days : 12.1

    = 30.16 or 30.2 days
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