Suppose a company's cost of goods sold for years 2 and 3 were $283,310 and $299,390 respectively. Also suppose that inventory had a balance of $34,740 at the end of year 1, $35,168 at the end of year 2, and $36,356 at the end of year 3. If the annual growth in total revenues is 8.42% for the foreseeable future, calculate the forecasted inventory balance at the end of year 5. Assume the same inventory turnover in all future years as that in year 3 calculated using the average asset balances. Also assume the same gross margin % in all future years as that in year 3. Note that year 3 is the latest year with reported results, while years 4 onwards are all forecasted years.

Suppose a company's cost of goods sold for years 2 and 3 were $283,310 and $299,390 respectively. Also suppose that inventory had a balance of $34,740 at the end of year 1, $35,168 at the end of year 2, and $36,356 at the end of year 3. If the annual growth in total revenues is 8.42% for the foreseeable future, calculate the forecasted inventory balance at the end of year 5. Assume the same inventory turnover in all future years as that in year 3 calculated using the average asset balances. Also assume the same gross margin % in all future years as that in year 3. Note that year 3 is the latest year with reported results, while years 4 onwards are all forecasted years.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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