The following is information for Palmer Company. Year 3 $ 583,825 102,400 Cost of goods sold Ending inventory Year 2 $ 366,650 92,750 Year 1 $ 331,300 97,500 Use the above information to compute inventory turnover for Year 3 and Year 2, and its days' sales in inventory at December 31, Year 3 and Year 2. From Year 2 to Year 3, did Palmer improve its (a) inventory turnover and (b) days' sales in inventory?
The following is information for Palmer Company. Year 3 $ 583,825 102,400 Cost of goods sold Ending inventory Year 2 $ 366,650 92,750 Year 1 $ 331,300 97,500 Use the above information to compute inventory turnover for Year 3 and Year 2, and its days' sales in inventory at December 31, Year 3 and Year 2. From Year 2 to Year 3, did Palmer improve its (a) inventory turnover and (b) days' sales in inventory?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:The following is information for Palmer Company.
Cost of goods sold
Ending inventory
Year 3
$ 583,825
102,400
Inventory turnover
Days' sales in inventory
Use the above information to compute inventory turnover for Year 3 and Year 2, and its days' sales in inventory at December 31, Year 3
and Year 2. From Year 2 to Year 3, did Palmer improve its (a) inventory turnover and (b) days' sales in inventory?
Use the above information to compute inventory turnover for Year 2, and its days' sales in inventory at December 31, Year 2.
Denominator
Numerator 1
366,650 /
Inventory turnover
Days' sales in inventory
Year 2
$366,650
92,750
$
Year 1
$ 331,300
97,500
$
$ 95,125
$ 366,650
$
$
=
Use the above information to compute inventory turnover for Year 3, and its days' sales in inventory at December 31, Year 3.
Numerator 1 Denominator
583,825 /
97,575
583,825
=
x 365 =
=
x 365 =
Ratio
3.9 times
0.0
Yes
Yes
Ratio
6.0 times
0.0
Did Palmer improve its (a) inventory turnover from Year 2 to Year 3 and (b) days' sales in inventory from Year 2 to Year 3?
(a) Did Palmer improve its inventory turnover from Year 2 to Year 3?
(b) Did Palmer improve its days' sales in inventory from Year 2 to Year 3?
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Step 1: Definition of inventory turnover and days' sales in inventory:
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VIEWStep 3: Calculation of inventory turnover for year 2 and year 3:
VIEWStep 4: Analyzing whether there is an improvement in the ratio from year 2 to year 3:
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