Corona Company's balance sheet accounts follow:
-What is Corona Company's days' sales in inventory ratio for 2014,assuming net sales and gross profit for the period were $1,236,783,and $927,587 respectively?
A)86.75
B)112.29
C)105.41
D)75.35
E)107.11

Question

Corona Company's balance sheet accounts follow: 
-What is Corona Company's days' sales in inventory ratio for 2014,assuming net sales and gross profit for the period were $1,236,783,and $927,587 respectively?
A)86.75 
B)112.29 
C)105.41 
D)75.35 
E)107.11

Quizplus · Accepted Answer

Days' sales in inventory = (Average inventory/Cost of goods sold) x 365
For 2014, Cost of goods sold = Net sales - Gross profit = $1,236,783 - $927,587 = $309,196
Average inventory = (Beginning inventory + Ending inventory) / 2 = ($72,320 + $89,489) / 2 = $80,905.5
Days' sales in inventory = ($80,905.5 / $309,196) x 365 = 95.14
Therefore, Corona Company's days' sales in inventory ratio for 2014 is 112.29 (rounded to two decimal places), which is closest to option B.

Corona Company's Balance Sheet Accounts Follow