ProofSmart Inc., a supplier of home insulation materials, was burned down in a recent fire. From the remains ofwhat used to be the accounting ledger, the following information was recovered:InventoryGross MarginInventory Turns131011142006$2,367,12142%11Prior to the fire, ProofSmart saw a sales growth of 48% in 2007, a record performance for the 18-year-oldcompany. (NOTE: Gross margin is defined as 1 - (COGS/ Sales).)What was the inventory turns for 2007? Choose the answer closest to the correct answer.15122007$2,418,25745 %[unreadable]Cannot be determined from the given data.None of these2

Name: ProofSmart Inc., a supplier of home insulation materials, was burned
Uploaded: 2024-03-04T10:43:15.000Z
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Description: ProofSmart Inc., a supplier of home insulation materials, was burned down in a recent fire. From the remains ofwhat used to be the accounting ledger, the following information was recovered:InventoryGross MarginInventory Turns131011142006$2,367,1214

Answered: ProofSmart Inc., a supplier of home…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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ProofSmart Inc., a supplier of home insulation materials, was burned down in a recent fire. From the remains of
what used to be the accounting ledger, the following information was recovered:
Inventory
Gross Margin
Inventory Turns
13
10
11
14
2006
$2,367,121
42%
11
Prior to the fire, ProofSmart saw a sales growth of 48% in 2007, a record performance for the 18-year-old
company. (NOTE: Gross margin is defined as 1 - (COGS/ Sales).)
What was the inventory turns for 2007? Choose the answer closest to the correct answer.
15
12
2007
$2,418,257
45 %
[unreadable]
Cannot be determined from the given data.
None of these
2

Expert Solution

Step 1

Lets understand the basics.

Inventory turns ratio shows how many times inventory gets converted into sales during the year.

Inventory turns = Cost of goods sold/Inventory

So if we use above formula then we can calculate cost of goods sold using below formula.

Cost of goods sold = Inventory * Inventory turns

If we are having gross margin ratio then we can calculate sales by,

Sales = Cost of goods sold/(100% - Gross margin %)

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