Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 6, Problem 3AA
1.
a)
To determine
Compute inventory turnover for Company S for the most recent years shown.
b.
To determine
Compute days’ sales inventory for Company S for the years shown.
2)
To determine
Determine whether the inventory turnover of Company S is in favorable or unfavorable trend.
3)
To determine
Determine whether the inventory turnover of Company S would underperform or outperform.
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Selected comparative financial statements of Haroun Company follow.
HAROUN COMPANY
Comparative Income Statements
For Years Ended December 31, 2021-2015
($ thousands)
Sales
2021
Cost of goods sold
$ 1,769
1,271
2020
$ 1,549
2019
2018
2017
2016
2015
$ 1,410
$ 1,292
$ 1,206
$ 1,121
$ 919
1,034
889
778
723
676
539
Gross profit
498
515
521
514
483
445
380
Operating expenses
Net income
377
295
271
200
173
171
142
$ 121
$ 220
$ 250
$ 314
$ 310
$ 274
$ 238
HAROUN COMPANY
Comparative Year-End Balance Sheets
December 31, 2021-2015
($ thousands)
Assets
Cash
Accounts receivable, net
Merchandise inventory
Other current assets
Long-term investments
Plant assets, net
Total assets
Liabilities and Equity
2021
2020
2019
2018
2017
2016
2015
$ 108
773
$ 142
812
$ 148
735
2,797
2,036
1,779
$ 151
564
1,499
$ 157
496
$ 155
$ 160
470
332
1,346
1,144
829
72
65
40
71
60
61
32
e
B
220
220
220
220
3,422
3,409
2,982
1,683
$ 7,172
$ 6,464
$ 5,684
$ 4,188
$ 4,019
1,740
1,546
$ 3,596
$ 2,900
1,327
Current liabilities…
15. Farrell's Window Supply has seen an increase in sales, but the company is concerned
with its inventory management. Has the increase in sales caused the company's ability to
manage inventory effectively to decrease? Support your answer by finding the changes in
inventory turnover and number of days' sales in inventory. Round ratios to one decimal
place.
Inventory:
Beginning of year
End of year
Purchases of inventory
20Y6
2015
$350,900
$352,300
325,400 350,900
330,600
325,200
shulpsins, of woted notandin
YOS has 2Y02 dina
When analyzing financial statements, what can you conclude when the inventory turnover ratio increases from 4.0 to 6.0 over a three year period.
Group of answer choices
a. The day’s inventory held are within the typical industry average
b. The day’s inventory held has increased over time
None of the above
c. The day’s inventory held has decreased over time
Chapter 6 Solutions
Principles of Financial Accounting.
Ch. 6 - Perpetual: Assume that Marvel uses a perpetual...Ch. 6 - Perpetual: Assume that Marvel uses a perpetual...Ch. 6 - Perpetual and Periodic: Assume that Marvel uses a...Ch. 6 - Periodic: Assume that Marvel uses a periodic FIFO...Ch. 6 - Prob. 5MCQCh. 6 - A company has cost of goods sold of 85,000 and...Ch. 6 - Describe how costs flow from inventory to cost of...Ch. 6 - Where is the amount of merchandise inventory...Ch. 6 - If costs are declining, will the LIFO or FIFO...Ch. 6 - If inventory errors are said to correct...
Ch. 6 - Prob. 5DQCh. 6 - What is the meaning of market as it is used in...Ch. 6 - What factors contribute to (or cause) inventory...Ch. 6 - When preparing interim financial statements, what...Ch. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Inventory ownership Homestead Crafts, a...Ch. 6 - Prob. 2QSCh. 6 - Computing goods available for sale Wattan Company...Ch. 6 - A company reports the following beginning...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Assigning costs with FIFO Trey Monson...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Prob. 18QSCh. 6 - Prob. 19QSCh. 6 - Prob. 20QSCh. 6 - Analyzing inventory Endor Company begins the year...Ch. 6 - Prob. 22QSCh. 6 - Prob. 23QSCh. 6 - Prob. 1ECh. 6 - Inventory costs Walberg Associates, antique...Ch. 6 - Perpetual: Inventory costing methods P1 Laker...Ch. 6 - Question: Laker Company reported the following...Ch. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Perpetual: Inventors- costing methodsFIFO and...Ch. 6 - Question: Refer to the information in Exercise...Ch. 6 - Question: Refer to the information in Exercise 6-7...Ch. 6 - Lower of cost or market Martinez Companys ending...Ch. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Periodic: Cost flow assumptions Lopez Company...Ch. 6 - Periodic: Cost flow assumptions Floras Gifts...Ch. 6 - Prob. 16ECh. 6 - Estimating ending inventorgross profit method On...Ch. 6 - Alternative cost flows Warnerwoods Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Warnerwoods...Ch. 6 - Alternative cost flows Montoure Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Montoure...Ch. 6 - Prob. 5APCh. 6 - Analysis of inventory errors A2 Navajo Company's...Ch. 6 - Prob. 7APCh. 6 - Periodic: Income comparisons and cost flows A1 P3...Ch. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Alternative cost flows Ming Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Ming Company...Ch. 6 - Perpetual: Alternative cost flows Aloha Company...Ch. 6 - Prob. 4BPCh. 6 - Prob. 5BPCh. 6 - Analysis of inventory errors A2 Hallam Company's...Ch. 6 - Prob. 7BPCh. 6 - Periodic: Income comparisons and cost flows A1 P3...Ch. 6 - Retail inventory method The records of Macklin Co....Ch. 6 - Prob. 10BPCh. 6 - SERIAL PROBLEM Business Solutions P2 A3 This...Ch. 6 - Prob. 1AACh. 6 - Prob. 2AACh. 6 - Prob. 3AACh. 6 - ETHICS CHALLENGE Golf Challenge Corp. is a retail...Ch. 6 - COMMUNICATING IN PRACTICE You are a financial...Ch. 6 - Prob. 3BTNCh. 6 - Prob. 5BTN
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- Financial statement data for years ending December 31 for Tango Company follow: a. Determine the inventory turnover for 20Y7 and 20Y6. b. Determine the days sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place. c. Does the change in inventory turnover and the days sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?arrow_forwardLast year, Nikkola Company had net sales of 2,299,500,000 and cost of goods sold of 1,755,000,000. Nikkola had the following balances: Refer to the information for Nikkola Company above. Required: Note: Round answers to one decimal place. 1. Calculate the average inventory. 2. Calculate the inventory turnover ratio. 3. Calculate the inventory turnover in days. 4. CONCEPTUAL CONNECTION Based on these ratios, does Nikkola appear to be performing well or poorly?arrow_forwardFinancial statement data for years ending December 31 for Holland Company follow: a. Determine the inventory turnover for 20Y4 and 20Y3. b. Determine the days sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place. c. Does the change in inventory turnover and the days sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?arrow_forward
- A manufacturer reported an inventory turnover ratio of 8.6 last year. During the current year, management introduced a new inventory control system that was expected to reduce average inventorylevels by 25 percent without affecting sales volume. Given these circumstances, would you expectthe inventory turnover ratio to increase or decrease during the current year? Explain.arrow_forwardUse the following information relating to Clover Company to calculate (a) the inventory turnover ratio, (b) gross margin, and (c) the number of days' sales in inventory ratio, for years 2022 and 2023. Assume a year has 365 days. Do not round intermediate calculations and round your final answers to 3 decimal places. Cost of Average Sales Goods Sold Inventory Year 2021 $260,000 $177,500 $25,000 Year 2022 305,000 221,250 30,000 Year 2023 343,000 242,250 35,000 Inventory Gross Days' Sales Turnover Margin in Inventory Year 2022 Year 2023arrow_forwardThe analysis of Inventory Turnover Ratio is as follows: 2015: 4.34 2016: 3.15 2017: 4.76 2018: 2.94 2019: 5.32 a. What is the trend analysis for that Inventory Turnover Ratio and why it is increasing/decreasing?arrow_forward
- b) A company had an average inventory last year of $180,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.) Average Inventory $enter the average inventory in dollars rounded to 0 decimal placesarrow_forwardUse the following information relating to Clover Company to calculate (a) the inventory turnover ratio, (b) gross margin, and (c) the number of days' sales in inventory ratio, for years 2022 and 2023. Assume a year has 365 days. Do not round intermediate calculations and round your final answers to 3 decimal places. Year 2021 Year 2022 Year 2023 Year 2022 Year 2023 Sales $260,000 305,000 333,000 Cost of Goods Sold $187,500 241,250 242,250 Inventory Turnover Average Inventory $25,000 30,000 38,000 Gross Margin Days' Sales in Inventoryarrow_forwardObtain Apple's annual report of Fiscal Year 2021 and answer the questions below. Hint: Go to the company's official website and look for the "Investor Relations" section. Download the 2021 annual report (also called Form 10-K). Do NOT use quarterly reports or reports of other years.arrow_forward
- Calculating Gross Profit and Inventory TurnoverThe following table presents, sales, revenue, cost of goods sold, and inventory for 3 companies: Samsung, HP & Apple.a. Compute the gross profit margin (GPM) for each of these companies for all 3 yearsb. Compute the inventory turnover ratio and the average inventory days outstanding for each company for the last two fiscal year using FIFO inventory costingc. What factors might determine the differences among these 3 companies’ ratios? ($millions) Fiscal year endingSamsung (Korean won) 12/31/2014 12//2013 12/31/2012Revenue 206,205,987 228,692,667 201,103,613COGS 128,278,800 137,696,309 126,651,931Inventory 17,317,504 19,134,868 17,747,413 HP (US Dollar) 10/31/2014 10/31/2013 10/31/2012Revenue (products only) 73,726…arrow_forwardUse the following information for the Quick Studies below. (Algo) ($ thousands) Net sales Current Year $ 802,213 393,339 Prior Year $ 453,350 134,505 Cost of goods sold QS 13-7 (Algo) Trend percents LO P1 Determine the Prior Year and Current Year trend percents for net sales using the Prior Year as the base year. (Enter the answers in thousands of dollars.) Current Year: Prior Year: Numerator: Trend Percent for Net Sales: 1 1 1 Denominator: = = = Trend Percent 0% 0 %arrow_forwardAnswer the following:a. Based on Table 1, compute the company's supply chain performance in terms of inventory turnover in Year 3.b. Based on Table 1, the company's inventory turnoverc. Based on Table 1, by how much did the company's inventory turnover change?arrow_forward
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