The 2012,2013,and 2014 partial balance sheets for Ottoman Manufacturing Company appear below. Sales revenue for Ottoman was $126,000 for 2012,$120,000 for 2013 and $114,000 for 2014 while cost of goods sold was $84,000 for 2012,$82,400 for 2013 and $72,500 for 2014.
What is the inventory turnover for 2013?
A)2.75 times
B)3.17 times
C)4.00 times
D)4.14 times

Question

The 2012,2013,and 2014 partial balance sheets for Ottoman Manufacturing Company appear below.  Sales revenue for Ottoman was $126,000 for 2012,$120,000 for 2013 and $114,000 for 2014 while cost of goods sold was $84,000 for 2012,$82,400 for 2013 and $72,500 for 2014.
What is the inventory turnover for 2013?
A)2.75 times 
B)3.17 times 
C)4.00 times 
D)4.14 times

Quizplus · Accepted Answer

Inventory Turnover = Cost of Goods Sold / Average Inventory

First, we need to calculate the average inventory for 2013:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Beginning Inventory = $14,000 
Ending Inventory = $16,800

Average Inventory = ($14,000 + $16,800) / 2 = $15,400

Now we can calculate the inventory turnover for 2013:

Inventory Turnover = $82,400 / $15,400 = 5.35 times

Therefore, the best choice is B (3.17 times) as it is the closest option to our calculated inventory turnover.

The 2012,2013,and 2014 Partial Balance Sheets for Ottoman Manufacturing Company