Ottawa, Inc. provides the following data: $$\begin{array} { | l | r | r | }
\hline & { \underline { 2019 } } & { \underline { 1018 } } \
\hline \text { Cash } & \$ 23,000 & \$ 22,000 \
\hline \text { Accounts Receivable, Net } & 37,000 & 37,000 \
\hline \text { Merchandise Inventory } & 55,000 & 25,000 \
\hline \text { Property, Plant, and Equipment, Net } & \underline { 127,000 } & \underline { 96,000 } \
\hline \text { Total Assets } & \$ 242,000 & \$ 180,000 \
\hline
\end{array}$$ For the year ending December 31, 2019:
$$\begin{array} { | l | r | }
\hline \text { Net Credit Sales } & \$ 300,000 \
\hline \text { Cost of Goods Sold } & ( 170,000) \
\hline \text { Gross Profit } & \$ 130,000 \
\hline
\end{array}$$ Calculate the days' sales in inventory for 2019. (Use 365 days for any calculations. Round any intermediate calculations and your final answer to two decimal places.)
A) 53.68
B) 118.09
C) 48.67
D) 85.88

Question

Ottawa, Inc. provides the following data: $$\begin{array} { | l | r | r | } 
\hline & { \underline { 2019 } } &  { \underline { 1018 } } \
\hline \text { Cash } & \$ 23,000 & \$ 22,000 \
\hline \text { Accounts Receivable, Net } & 37,000 & 37,000 \
\hline \text { Merchandise Inventory } & 55,000 & 25,000 \
\hline \text { Property, Plant, and Equipment, Net } & \underline { 127,000 } & \underline { 96,000 } \
\hline \text { Total Assets } & \$ 242,000 & \$ 180,000 \
\hline
\end{array}$$ For the year ending December 31, 2019:
$$\begin{array} { | l | r | } 
\hline \text { Net Credit Sales } & \$ 300,000 \
\hline \text { Cost of Goods Sold } & ( 170,000) \
\hline \text { Gross Profit } & \$ 130,000 \
\hline
\end{array}$$ Calculate the days' sales in inventory for 2019. (Use 365 days for any calculations. Round any intermediate calculations and your final answer to two decimal places.)
A) 53.68
B) 118.09
C) 48.67
D) 85.88

Quizplus · Accepted Answer

Days' sales in inventory for 2019 is calculated as follows: $$ \text{Days' Sales in Inventory} = \left( \frac{\text{Ending Inventory}}{\text{Cost of Goods Sold}} \right) \times 365 $$ $$ = \left( \frac{55,000}{170,000} \right) \times 365 \approx 118.09 $$ However, the correct formula should be: $$ \text{Days' Sales in Inventory} = \left( \frac{\text{Ending Inventory}}{\text{Cost of Goods Sold}} \right) \times 365 $$ $$ = \left( \frac{55,000}{170,000} \right) \times 365 \approx 118.09 $$ The mistake in the explanation is acknowledging an error in the formula and then repeating the same formula without correction. The correct calculation indeed results in approximately 118.09 days, indicating that the inventory turns over approximately every 118.09 days.

Ottawa, Inc For the Year Ending December 31, 2019 Calculate the Days' Sales in Inventory for 2019