24 Please use the financial information to compute the inven

24) Please use the financial information to compute the inventory turnover for Arena,Inc for Year 2: Year 1 $37,500 36,850 Year 2 Cash Short-term investments 90,000 90,000 85,500 86,250 21,000 117,000 Accounts receivable, net Merchandise inventory Plant assets Net sales Prepaid expenses 12,100 13,500 388,000 392,000 113,400 111,750 711,000 706,000 390,000 385,500 Accounts payable Cost of goods sold 24) A) 3.86. B) 3.28. C) 5.78. D)4.72. E)4.33. 25) Marshall Inc. reported cost of goods sold of $977,000 for Year 1 and $953,000 for year 2. Using Year 1 as the base year, what was the percentage change for cost of goods sold from Year 1 to Year 2? 25) A) 2.49% decrease. B) 2.46% increase. C) 2.46% decrease. D) 2.52% decrease. E) 2.52% increase.

Solution

24)

Inventory Turnover Ratio shows the number of times a company has sold inventory during a period.

Inventory Turnover

Cost of Goods Sold

Year 2

Cost of Goods Sold (A)

$390,000

Average Inventories (B)

[(Beg 117,000 + Ending 121,000)/2]

$119,000

Inventory Turnover (A/B)

3.28

(390,000 / 119,000)

The correct option is B) 3.28

25)

Base Year = Year 1 = Cost of Goods Sold = $977,000

Year 2 Cost of Goods Sold = $953,000

Change from Year 1 to Year 2 = $977,000- 953,000 = $24,000 Decrease

Percentage Change from Year 1 to Year 2 = Change in Cost of Goods Sold / Base Year Value x 100

= $24,000 / 977,000 x 100

= 2.46% Decrease

The correct option is C) 2.46% decrease

26)

Since the purchase of land in exchange for common stock does not involve any cash flow (inflow or outflow), this transaction will not be a part of Cash Flow Statement. This transaction will come under Schedule of noncash investing or financing activity.

Hence, the correct option is E).

27)

The correct option is C) the payment of interest expense accrued in a previous accounting period.

This transaction will reduce the Cash balance.

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Inventory Turnover
Cost of Goods Sold	Year 2
Cost of Goods Sold (A)	$390,000
Average Inventories (B) [(Beg 117,000 + Ending 121,000)/2]	$119,000
Inventory Turnover (A/B)	3.28 (390,000 / 119,000)