A business had credit sales of $5,430,000 and cost of goods sold of $3,431,000 during the current year

Accounting Apr 19, 2021

A business had credit sales of $5,430,000 and cost of goods sold of $3,431,000 during the current year. At the start of the year, the outstanding merchandise balance was $425,000, which decreased to $423,000 by year end. Based on the information above, calculate the Days in inventory to the nearest day:

Expert Solution

Computation of Days in Inventory:

Inventory Turnover Ratio = Net Cost of Goods Sold/Average Inventory

=$3,431,000/($425,000+$423,000)/2

=8.092 times

Days in Inventory = 365 days/Inventory Turnover Ratio

=365 days/8.092

=45.11 days or 45 days

So, Days in Inventory is 45 days.

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