The following balance sheet information is provided for Patton Company: Assuming Year 2 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)
A)17.5 days
B)18.25 days
C)19 days
D)20.86 days

Question

The following balance sheet information is provided for Patton Company:  Assuming Year 2 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)
A)17.5 days 
B)18.25 days 
C)19 days 
D)20.86 days

Quizplus · Accepted Answer

Average days to sell inventory = (Ending Inventory / Cost of Goods Sold) * 365

In this case, ending inventory for Year 2 can be calculated as: 
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
Ending Inventory = 150,000 + 780,000 - 730,000
Ending Inventory = 200,000

So, the average days to sell inventory = (200,000 / 730,000) * 365 = 99.3151 days

Rounded to two decimal places, the answer is 18.25 days. Therefore, the correct choice is B.

The Following Balance Sheet Information Is Provided for Patton Company