Question

Anthony Thomas Candies (ATC) reported the following financial data for 2021 and 2020: 2021 2020 Sales...

Anthony Thomas Candies (ATC) reported the following financial data for 2021 and 2020:

2021 2020
Sales $ 317,000 $ 290,000
Sales returns and allowances 8,900 4,300
Net sales $ 308,100 $ 285,700
Cost of goods sold:
Inventory, January 1 63,000 26,000
Net purchases 134,000 144,000
Goods available for sale 197,000 170,000
Inventory, December 31 63,000 63,000
Cost of goods sold 134,000 107,000
Gross profit $ 174,100 $ 178,700

The average days inventory for ATC (rounded) for 2021 is: (Round your intermediate calculations to two decimal places. Round your final answer to the nearest whole number.)

A. 171 days.

B. 222 days.

C. 231 days.

D. Less than 100 days.

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Answer #1

Average inventory for 2021 = (Beginning inventory + Ending inventory)/2

= (63,000 + 63,000)/2

= $63,000

Inventory turnover ratio for 2021 = Cost of goods sold/Average inventory for 2021

= 134,000/63,000

= 2.13

The average days inventory for 2021 = 365/Inventory turnover ratio for 2021

= 365/2.13

= 171 days

The average days inventory for ATC (rounded) for 2021 = 171 Days

Correct option is (A)

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