31PGA_3
Question
Empire State Carpets’s books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by \(8,000 and that the ending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandise inventory at December 31, 2018, was correct.
| 2019 | 2018 | 2017 |
Net Sales Revenue | \( 220,000 | \) 162,000 | \( 176,000 |
Cost of Goods Sold: |
|
|
|
Beginning Merchandise Inventory | \)22,000 | \(29,000 | \)46,000 |
Net cost of purchase | 132,000 | 90,000 | 76,000 |
Cost of goods available for sale | 154,000 | 119,000 | 122,000 |
Less: Ending Merchandise Inventory | 32,000 | 22,000 | 29,000 |
Cost of goods sold | 122,000 | 97,000 | 93,000 |
Gross Profit | 98,000 | 65,000 | 83,000 |
Operating Expenses | 72,000 | 38,000 | 48,000 |
Net Income | \( 26,000 | \) 27,000 | $ 35,000 |
Requirements
3. Compute the inventory turnover and days’ sales in inventory using the corrected income statements for the three years. (Round all numbers to two decimals.)
Step-by-Step Solution
VerifiedAnswer
2019 2018 2017
Inventory Turnover--------------- 5.82 3.6 2.05
Days’ sales in inventory-------- 62.71 101.38 178.05
| 2019 | 2018 | 2017 |
Net Sales Revenue | $ 220,000 | $ 162,000 | $ 176,000 |
Cost of Goods Sold: |
|
|
|
Beginning Merchandise Inventory | $22,000 | $37,000 | $46,000 |
Net cost of purchase | 132,000 | 90,000 | 76,000 |
Cost of goods available for sale | 154,000 | 127,000 | 122,000 |
Less: Ending Merchandise Inventory | 23,000 | 22,000 | 37,000 |
Cost of goods sold | 131,000 | 105,000 | 85,000 |
Gross Profit | 89,000 | 57,000 | 91,000 |
Operating Expenses | 72,000 | 38,000 | 48,000 |
Net Income | $ 17,000 | $ 19,000 | $ 43,000 |