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Financial statement data for years ending December 31 for Tango Company follow: a. Determine the inventory turnover for 20Y7 and 20Y6. b. Determine the number of days’ sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place. c. Are the changes in inventory turnover and the number of days’ sales in inventory from 20Y6 to 20Y7 favorable or unfavorable?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 6, Problem 8BE
Textbook Problem
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Financial statement data for years ending December 31 for Tango Company follow:

Chapter 6, Problem 8BE, Financial statement data for years ending December 31 for Tango Company follow: a. Determine the , example  1

  1. a. Determine the inventory turnover for 20Y7 and 20Y6.
  2. b. Determine the number of days’ sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place.
  3. c. Chapter 6, Problem 8BE, Financial statement data for years ending December 31 for Tango Company follow: a. Determine the , example  2 Are the changes in inventory turnover and the number of days’ sales in inventory from 20Y6 to 20Y7 favorable or unfavorable?

a.

To determine

Compute the inventory turnover for Company A and Company T.

Explanation of Solution

Inventory turnover: This is the ratio which analyzes the number of times inventory is sold during the period. This ratio gauges the efficacy of inventory management. Larger the ratio, more efficient the inventory management.

Compute the inventory turnover for 20Y7:

Inventory turnover=Cost of goods soldAverage inventory=($3,864,000$770,000+$840,0002)=$3,864,000$805,000=4.8 times

Thus, the inventory turnover for 20Y7 is 4

b.

To determine

Compute the number of days’ sales in inventory for 20Y7 and 20Y6.

c.

To determine

Identify whether the change in inventory turnover and the number of days’ sales inventory from 20Y6 to 20Y7 is favorable or unfavorable.

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Chapter 6 Solutions

Financial And Managerial Accounting
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