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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Inventory analysis
Costco Wholesale Corporation (COST)

and Wal-Mart Stores Inc. (WMT)

compete against each other in general merchandise retailing, gas stations, pharmacies, and optical centers. Below is selected financial information for both companies from a recent year's financial statements (in millions):


a. Determine for bom companies (1) the inventory turnover and (2) the days' sales in inventory. Round to one decimal place.
b. Compare and interpret the inventory metrics computed in (a).

To determine

Concept Introduction:

Inventory Turnover Ratio: Inventory turnover ratio means that in the amount of time, the sale of an inventory is processed. It tells about the firm's inventory position in comparison of the cost of goods sold.

The day's sales in inventory: It means in a year the time the inventory is sold. It means that 365/ inventory turnover ratio.

Requirement-1:

To Calculate:

Determine inventory turnover ratio and the day's sales in inventory.

Explanation
    ParticularsCompany 1Company 2
    Opening Inventory(A)845644858
    Closing Inventory (B)89084514
    COGS (C)
To determine

Concept Introduction:

Inventory Turnover Ratio: Inventory turnover ratio means that in how much time our sale is of our inventory. It tells about the firm's inventory position in comparison of the cost of goods sold.

The day's sales in inventory: It means in a year how much time our inventory takes to get sold. It means that 365/ inventory turnover ratio.

Requirement-2:

To Identify:

Conclusion can be drawn from these data concerning the inventory.

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