# Complete the missing pieces of McCarthy Company’s inventory calculations and ratios.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

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Section
FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 10, Problem 17EA
Textbook Problem
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## Complete the missing pieces of McCarthy Company’s inventory calculations and ratios.

To determine

Concept introduction:

Inventory Turnover Ratio:

It measures the efficiency of the firm in converting its inventory into sales. It is usually calculated by dividing the Cost of goods sold by the Average inventory. The formula of the Inventory Turnover Ratio is as follows:

Inventory Turnover Ratio=Cost of goods soldAverage inventory

Note: Average inventory is calculated with the help of following formula:

Average inventory=(Beginning inventory + Ending inventory)2

Day’s sales in inventory:

Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated using the following formula:

Day Sales in Inventory =  Inventory ×365Cost of Goods Sold

To calculate:

The missing values

### Explanation of Solution

The missing values are calculated as follows:

 Beginning Inventory (A) $8,500 (100500-92000) Purchases (B)$ 92,000 Goods Available for Sale (C) = (A+B) \$ 100,500

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