Selected financial information for Feemster Company for 2012 follows. Sales $ 2,000,000 Cost of goods sold 1,400,000 Merchandise inventory Beginning of year 155,000 End of year 195,000. Required: Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turnover during 2012?

The merchandise inventory turnover during 2012 is 8 times.

Explanation:

The following information is given:

Sales - $ 2,000,000

Cost of goods sold - $1,400,000

Merchandise inventory Beginning of year - $ 155,000

Merchandise inventory End of year - $ 195,000

After considering these information, it is easy to calculate the merchandise inventory turnover. The formula is shown below:

Merchandise Inventory Turnover = COGS : Average inventory

where average inventory = (opening inventory + ending inventory) : 2

So,

Average inventory = ($ 155,000 + $ 195,000) : 2

= $175,000

Now, we can compute easily

Merchandise Inventory Turnover = 1,400,000 : $175,000

= 8 times

Thus, the merchandise inventory turnover during 2012 is 8 times.