Pretty, inc. provides the following data: 2017 2016cash $28,000 $21,000accounts receivable, net 40,000 40,000merchandise inventory 53,000 30,000property, plant, and equipment, net 124,000 91,000total assets $245,000 $182,000net credit sales $240,000cost of goods sold (130,000 )gross profit $110,000calculate days' sales in inventory for 2017. (round any intermediate calculations and your final answer to two decimal places.)

The days' sales in inventory for 2017 is 116.61 days

Explanation:

For computing the days sales in inventory first, we have to compute the inventory turnover ratio which is shown below:

Inventory turnover ratio = (Cost of goods sold ÷ Average inventory)

where,  

Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2

= ($30,000 + $53,000) ÷ 2

= $41,500

And, the cost of good sold is $130,000

Now put these values to the above formula  

So, the answer would be equal to  

= $130,000 ÷ $41,500

= 3.13 times.

And, the Days sales in inventory  

= (Total number of days in a year ÷ inventory turnover ratio )

= 365 days ÷ 3.13 times

= 116.61 days

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