FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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### Inventory and Sales Analysis of Sun Concepts

Sun Concepts sells and installs solar energy products. Information from the financial statements for the last two years is presented as follows:

| Year  | Beginning Inventory | Ending Inventory | Cost of Goods Sold |
|-------|---------------------|------------------|---------------------|
| Year 1| $90,000             | $130,000         | $605,000            |
| Year 2| $130,000            | $110,000         | $720,000            |

**Question**: The number of days to sell in Year 2 was approximately:

#### Multiple Choice Options:
- 75 days
- 61 days
- 73 days
- 66 days

To calculate the number of days to sell, use the formula for the inventory turnover period:

\[ \text{Days to Sell} = \frac{365}{\text{Inventory Turnover Ratio}} \]

The Inventory Turnover Ratio is calculated as:

\[ \text{Inventory Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} \]

Where,

\[ \text{Average Inventory} = \frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2} \]

Plug in the given values to find the approximate days to sell in Year 2.
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Transcribed Image Text:### Inventory and Sales Analysis of Sun Concepts Sun Concepts sells and installs solar energy products. Information from the financial statements for the last two years is presented as follows: | Year | Beginning Inventory | Ending Inventory | Cost of Goods Sold | |-------|---------------------|------------------|---------------------| | Year 1| $90,000 | $130,000 | $605,000 | | Year 2| $130,000 | $110,000 | $720,000 | **Question**: The number of days to sell in Year 2 was approximately: #### Multiple Choice Options: - 75 days - 61 days - 73 days - 66 days To calculate the number of days to sell, use the formula for the inventory turnover period: \[ \text{Days to Sell} = \frac{365}{\text{Inventory Turnover Ratio}} \] The Inventory Turnover Ratio is calculated as: \[ \text{Inventory Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} \] Where, \[ \text{Average Inventory} = \frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2} \] Plug in the given values to find the approximate days to sell in Year 2.
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