7 Pascarelli Corporations inventory at the end of Year 2 was

7. Pascarelli Corporation\'s inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000. Cost of goods sold amounted to $870,000 in Year 2. How long is the company\'s average sale period (turnover in days) for Year 2 closest to?

Solution

Answer is C.

Inventory at the end of Year 1 = $150,000
Inventory at the end of Year 2 = $122,000

Average Inventory = (Inventory at the end of Year 1 + Inventory at the end of Year 2) / 2
Average Inventory = ($150,000 + $122,000) / 2
Average Inventory = $136,000

Average Sales Period = 365 * Average Inventory / Cost of Goods Sold
Average Sales Period = 365 * $136,000 / $870,000
Average Sales Period = 57.0 days