For 2015, Nervous Energy Inc.reported $24,000 beginning inventory and $26,000 ending inventory.Net sales were $160,000 and gross profit was $55,000 for the same period.Based on these figures, inventory turnover for 2015 was
A)3.4 times.
B)4.2 times.
C)6.4 times.
D)9.2 times.

Question

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory

Average inventory = (Beginning inventory + Ending inventory) / 2
= ($24,000 + $26,000) / 2
= $25,000

Cost of goods sold = Net sales - Gross profit
= $160,000 - $55,000
= $105,000

Inventory turnover ratio = $105,000 / $25,000
= 4.2 times

Therefore, the best choice is B) 4.2 times.