Inventory Turnover and Days' Sales in InventoryFinancial statement data for years ending December 31 for Holland Company follows: 20Y420Y3Cost of merchandise sold$4,504,500 $3,715,200 Inventories: Beginning of year788,000 760,000 End of year850,000 788,000 a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place. Inventory Turnover20Y4 20Y3 b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations and final answers to one decimal place. Days' Sales in Inventory20Y4days20Y3daysc. Does the change in inventory turnover and the days' sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?Unfavorable

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Description: Inventory Turnover and Days' Sales in InventoryFinancial statement data for years ending December 31 for Holland Company follows: 20Y420Y3Cost of merchandise sold$4,504,500 $3,715,200 Inventories: Beginning of year788,000 760,000 End of

Inventory Turnover Ratio represents the effective management of inventory by the company. It…

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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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Inventory Turnover and Days' Sales in Inventory

Financial statement data for years ending December 31 for Holland Company follows:

	20Y4	20Y3
Cost of merchandise sold	$4,504,500		$3,715,200
Inventories:
Beginning of year	788,000		760,000
End of year	850,000			788,000

a. Determine the inventory turnover for 20Y4 and 20Y3. Round to one decimal place.

	Inventory Turnover
20Y4
20Y3

b. Determine the days' sales in inventory for 20Y4 and 20Y3. Assume 365 days a year. Round interim calculations and final answers to one decimal place.

	Days' Sales in Inventory
20Y4	days
20Y3	days

c. Does the change in inventory turnover and the days' sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?
Unfavorable

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