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Financial statement data for years ending December 31 for Tango Company follow: 20Y7 20Y6 Cost of goods sold $3,894,185 $4,002,225 Inventories: Beginning of year 795,700 773,800 End of year 861,400 795,700 Required a. Determine the inventory turnover for 20Y7 and 20Y6. Round to one decimal place.

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Answer:

A. 20Y7 Inventory Turnover 4.7

20Y6 Inventory Turnover=5.1

B. 20Y7 77.66 days

20Y6 71.57 days

Explanation:

A. Calculation to determine the inventory turnover for 20Y7 and 20Y6

Using this formula

Inventory Turnover = Cost of Goods Sold/Average inventory

Let plug in the formula

20Y7 Inventory Turnover=$3,894,185/[(795,700+861,400)/2]

20Y7 Inventory Turnover=$3,894,185/($1,657,100/2)

20Y7 Inventory Turnover=$3,894,185/828,550

20Y7 Inventory Turnover=4.7

20Y6 Inventory Turnover= $4,002,225/(773,800+795,700)/2]

20Y6 Inventory Turnover=$4,002,225/(1,569,500/2)

20Y6 Inventory Turnover=$4,002,225/784,750

20Y6 Inventory Turnover=5.1

B. Calculation to determine the number of days' sales in inventory for 20Y7 and 20Y6

Days in inventory = 365/Inventory Turnover

20Y7 Days in inventory=365/4.7=77.66 days

20Y6 Days in inventory=365/5.1=71.57 days

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