The following information was obtained from the accounting records of the Guerra Corporation for 2010: $\begin{array}{ll}\text { Cost of goods sold }&\$3,600,000\
\text { Merchandise inventory: }\
&\text { January } 1 & 400,000 \
&\text { December } 31 & 460,000
\end{array}$
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

Question

The following information was obtained from the accounting records of the Guerra Corporation for 2010: $\begin{array}{ll}\text { Cost of goods sold }&\$3,600,000\
\text { Merchandise inventory: }\
&\text { January } 1 & 400,000 \
&\text { December } 31 & 460,000
\end{array}$ 
 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

Quizplus · Accepted Answer

The number of days' sales in inventories is calculated using the formula: $\text{Days of Inventory} = \left(\frac{\text{Average Inventory}}{\text{Cost of Goods Sold}}\right) \times 365$. The average inventory is $\frac{(400,000 + 460,000)}{2} = 430,000$. Thus, $\text{Days of Inventory} = \left(\frac{430,000}{3,600,000}\right) \times 365 \approx 43.6$ days.

The Following Information Was Obtained from the Accounting Records of the Guerra