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Financial statement data at December 31 for Ecco Company are as follows: Cost of goods sold $552,500 Inventories: Beginning of year 200,000 End of year 140,000 Determine the number of days' sales in inventory for the year. a.39.6 days b.132.1 days c.92.5 days d.112.3 days

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Answer:

The answer is D.

Explanation:

Number of days' sales in inventory is the average number of days that a company will take to sell of its inventory within the year. It tells us the number of days funds are tied up in inventory.

The formula is (average inventory/cost of sales) x 365days.

Average inventory =

($200,000 + $140,000) ÷ 2

$170,000

Therefore, Number of days' sales in inventory is

($170,000/$552,500) x 365days

=112.3 days

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