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Financial statement data for years ending December 31 for Amsterdam Company follow: 20Y4 20Y3 Cost of...

  1. Financial statement data for years ending December 31 for Amsterdam Company follow:

    20Y4 20Y3
    Cost of merchandise sold $3,598,900 $3,015,630
    Inventories:
      Beginning of year 593,000 589,600
      End of year 648,000 593,000

    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
    20Y3

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

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Answer #1

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

Inventory Turnover
20Y4 3598900/620500 = 5.8
20Y3 3015630/591300 = 5.1

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 365/5.8 = 62.9 days
20Y3 365/5.1 = 71.6 days

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

Favorable

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