Financial statement data for years ending December 31 for Tango Company follow: 20Y7 20Y6 Cost of goods sold $3,894,185 $4,002,225 Inventories: Beginning of year 795,700 773,800 End of year 861,400 795,700 Required a. Determine the inventory turnover for 20Y7 and 20Y6. Round to one decimal place.

A. 20Y7 Inventory Turnover 4.7

20Y6 Inventory Turnover=5.1

B. 20Y7 77.66 days

20Y6 71.57 days

Explanation:

A. Calculation to determine the inventory turnover for 20Y7 and 20Y6

Using this formula

Inventory Turnover = Cost of Goods Sold/Average inventory

Let plug in the formula

20Y7 Inventory Turnover=$3,894,185/[(795,700+861,400)/2]

20Y7 Inventory Turnover=$3,894,185/($1,657,100/2)

20Y7 Inventory Turnover=$3,894,185/828,550

20Y7 Inventory Turnover=4.7

20Y6 Inventory Turnover= $4,002,225/(773,800+795,700)/2]

20Y6 Inventory Turnover=$4,002,225/(1,569,500/2)

20Y6 Inventory Turnover=$4,002,225/784,750

20Y6 Inventory Turnover=5.1

B. Calculation to determine the number of days' sales in inventory for 20Y7 and 20Y6

Days in inventory = 365/Inventory Turnover

20Y7 Days in inventory=365/4.7=77.66 days

20Y6 Days in inventory=365/5.1=71.57 days

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