Financial statement data for years ending December 31 for Salsa Company follow: 20Υ7 20Υ6 Cost of merchandise sold $2,912,700 $3,009,790 Inventories: Beginning of year 489,000 481,900 End of year 533,000 489,000 a. Determine the inventory turnover for 20Y7 and 20Y6. Round to one decimal place. Inventory Turnover 20Υ7 20Y6 b. Determine the days' sales in inventory for 20Y7 and 20Y6. Assume 365 days a year. Round interim calculations and final answers to one decimal place. Days' Sales in Inventory 20Υ7 days 20Y6 days c. Does the change in the inventory turnover and the days' sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend? Unfavorable v

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Inventory Turnover and Days' Sales in Inventory**

Financial statement data for years ending December 31 for Salsa Company follow:

|                           | 20Y7         | 20Y6         |
|---------------------------|--------------|--------------|
| Cost of merchandise sold  | $2,912,700   | $3,009,790   |
| Inventories:              |              |              |
| - Beginning of year       | 489,000      | 481,900      |
| - End of year             | 533,000      | 489,000      |

**a.** Determine the inventory turnover for 20Y7 and 20Y6. *Round to one decimal place.*

**Inventory Turnover**

|       |        |
|-------|--------|
| 20Y7  |        |
| 20Y6  |        |

**b.** Determine the days' sales in inventory for 20Y7 and 20Y6. Assume 365 days a year. *Round interim calculations and final answers to one decimal place.*

**Days' Sales in Inventory**

|       |          |
|-------|----------|
| 20Y7  |          |
| 20Y6  |          |

**c.** Does the change in the inventory turnover and the days' sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?  
**Unfavorable** ✔️

**Feedback**

- The average inventory must be computed first. Consider the components involved in these ratios. Generally, the larger the inventory turnover, the more efficiently and effectively the company is managing inventory.
Transcribed Image Text:**Inventory Turnover and Days' Sales in Inventory** Financial statement data for years ending December 31 for Salsa Company follow: | | 20Y7 | 20Y6 | |---------------------------|--------------|--------------| | Cost of merchandise sold | $2,912,700 | $3,009,790 | | Inventories: | | | | - Beginning of year | 489,000 | 481,900 | | - End of year | 533,000 | 489,000 | **a.** Determine the inventory turnover for 20Y7 and 20Y6. *Round to one decimal place.* **Inventory Turnover** | | | |-------|--------| | 20Y7 | | | 20Y6 | | **b.** Determine the days' sales in inventory for 20Y7 and 20Y6. Assume 365 days a year. *Round interim calculations and final answers to one decimal place.* **Days' Sales in Inventory** | | | |-------|----------| | 20Y7 | | | 20Y6 | | **c.** Does the change in the inventory turnover and the days' sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend? **Unfavorable** ✔️ **Feedback** - The average inventory must be computed first. Consider the components involved in these ratios. Generally, the larger the inventory turnover, the more efficiently and effectively the company is managing inventory.
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