Question

Walker Corp. has current liabilities of $460,000, a quick ratio of .86, inventory turnover of 6.2, and a current ratio of 1.4. What is the cost of goods sold for the company? (Do not round intermediate calculations.)

Homework Answers

Answer #1

Current Ratio = Current Assets / Current Liabilities

1.4 = Current Assets / $460,000

Current Assets = $460,000 * 1.4

= $644,000

Quick Ratio = (Current Assets - Inventory - Prepaid expenses) / Current Liabilities

= .86 = ($644,000 - Inventory - 0) / $460,000

$460,000 * .86 = $644,000 - Inventory

$395,600 = $644,000 - Inventory

Inventory = $644,000 - $395,600

= $248,400

Assuming the above to be Average Inventory

Inventory Turnover = Cost of goods sold / Average Inventory

6.2 = Cost of goods sold / $248,400

Cost of goods sold = $248,400 * 6.2

= $1,540,080

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