Here they confused us with incomplete information for calculation of cost of goods sold.
For cost of goods sold we need purchase and beginning inventory we can't calculate cost of goods without purchase and opening stock I thought they already calculate COGS before the calculation of ending stock because ending stock will come only after the calculation of opening stock and purchase that's why they did not ask COGS in question.
Cost of goods sold only need in Inventory turnover formula, but we can another formula for inventory turnover ratio
There is another way for inventory turnover ratio actual sales divided by average receivables or average inventory.
Inventory turnover ratio = COGS or) Actual Sales
Average inventory Average receivables
First, we need to subtract 10% cash sales from net sales to get the actual sales then divide by average receivable for inventory turnover ratio.
Year 2 Year 3
Net sales (1200*100) 120,000 Net sales 150,000 (1200*125) 150,000
(-) 10% cash sales 12000 - 10% cash sales 15000
Actual sales 108,000 Actual sales 135,000
Inventory turnover ratio = 108000 Inventory turnover ratio = 135,000
12000 14,400
= 9 =9.375
I hope you understand if there is anything let me know.
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[Shaik] [Sumair] [Receivable Accountant]
[Receivable Accountant ]
[Printech Middle East LLC]
[Dubai]
[United Arab emirates][
shaiksumair7076@...]
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Original Message:
Sent: 09-27-2022 12:06 PM
From: TIMUCIN ONER
Subject: PART 2 INV TURNOVER RATIO
Dear Friends,
In this question how can I calculet COGS? or is there any other way to reach inventory turn over??
The year-end financial statements for Queen Bikes reflect the data presented as follows. Ten percent of Queen's net sales are in cash.
Year 1 | Year 2 | Year 3 |
| | | |
Net sales | 1,500 units at $100 | 1,200 units at $100 | 1,200 units at $125 |
Ending inventory | 100 units at $50 | 100 units at $50 | 100 units at $50 |
Average receivables | $12,500 | $12,000 | $14,400 |
Net income | $18,750 | $ 9,400 | $26,350 |
Queen's inventory turnover ratios for Year 2 and Year 3 are
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TIMUCIN ONER
Director/Manager
ANTALYA
Turkey
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