CMA Study Group

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.

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.

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.

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.

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.