The following data were extracted from the income statement of Keever Inc.: Current Year Previous Year Sales $18,500,000 $20,000,000 Beginning inventories 940,000 860,000 Cost of goods sold 9,270,000 10,800,000 Ending inventories 1,120,000 940,000 a. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inv

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Explanation:

1. Inventory turnover = Cost of goods sold / Average inventory

Current year inventory turnover = Cost of goods sold / [ Beginning inventory + Closing inventory / 2]

= 9,270,000 / [ 940,000 + 1,120,000 / 2]

= 9,270,000 / 1,030,000

= 9 times

Previous year inventory turnover = Cost of goods sold / [ Beginning inventory + Closing inventory / 2]

= 10,800,000 / [ 860,000 + 940,000 / 2 ]

= 10,800,000 / 900,000

= 12 times

2. The number of day sales in inventory = Number of days in a year / Inventory turnover

Current year = 365 / 9

= 40.55

Previous year = 365 / 12

= 30.42

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