Based on the Following Information Compute
(A) Inventory Turnover

question 98

Essay

Based on the following information compute
(a) inventory turnover,
(b) average daily cost of merchandise sold, and
(c) days' sales in inventory for the current year. Use a 365-day year.
(d) If an inventory turnover of 12 is average for the industry, how is this company doing? $\begin{array}{lrr}\text { Item }&\text { Prior Year } & \text { Current Year } \\\text { Cost of merchandise sold } & \$ 172,900 & \$ 215,000 \\\text { Inventory } & 18,000 & 12,000\end{array}$

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Definitions:

Gift Tax

A federal tax on the transfer of property by gift from one individual to another with the donor being primarily responsible for paying the tax.

FMV

Fair Market Value, an estimation of the market value of a property or asset, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

Adjusted Basis

The original cost of an asset adjusted for factors such as depreciation or improvements, used to calculate capital gains or losses for tax purposes.

Straight-line Depreciation

A method of calculating the depreciation of an asset evenly over its useful life.