Question

30. From the following information, calculate Inventory Turnover Ratio :
Total Sales 6,25,000; Sales Return $25,000; Gross Loss on Sales 10%; Closing
Inventory 70,000; Excess of Closing Inventory over Opening Inventory 40,000.
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Answer 1

Answer:

Inventory turnover ratio = Cost of goods sold ( WN 1)

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Average inventory (WN 2)

= 3,60,000

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90,000

= 4 Times

Working notes:-

1) Cost of goods sold = Gross sales - (Sales return + gross profit)

= 5,00,000 - (50,000 + 90,000)

= 3,60,000.

2) Average Inventory = 1,00,000 + 80,000

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2

= 90,000.

Closing inventory is 20,000 more than opening inventory hence opening inventory is 1,00,000 - 20,000 = 80,000.

Explanation:

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