The following information came from the income statement of

The following information came from the income statement of the Wilkens Company at December 31, 2017: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. What is Wilkens\' inventory turnover ratio for 2017?

Solution

The first step is to determine the cost of goods sold

cost of goods sold = Sales revenue - Gross profit

= $1,800,000 - $600,000

= $1,200,000

Inventory turnover = cost of goods sold/average inventory.

= $1,200,000/ [($160,000 + $240,000)/2]

= 6.0 times