Purchasers - #44,880 Sales - #85,850 Trade creditors - #12,250 Trade debtors - #24,000 Accrued expenses - # 350 Prepaid expenses - # 700 Stock 1/1/2006 - #2...

Assessment: JAMB UTME - Principles of Accounts - 2012 Subject: Financial Accounting

Question 1 Report

Purchasers - #44,880

Sales - #85,850

Trade creditors - #12,250

Trade debtors - #24,000

Accrued expenses - # 350

Prepaid expenses - # 700

Stock 1/1/2006 - #25,120

Stock 31/12/2006 - #27,840Determine the number of times stock was turned over during the period to the nearest figure

Answer Details
To determine the number of times stock was turned over during the period, we need to calculate the inventory turnover ratio. This ratio tells us how many times the company sold and replaced its inventory during the year. The formula for inventory turnover ratio is: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Cost of Goods Sold (COGS) = Beginning Inventory + Purchases - Ending Inventory Average Inventory = (Beginning Inventory + Ending Inventory) / 2 Using the information given in the question: COGS = 25,120 + 44,880 - 27,840 = 42,160 Average Inventory = (25,120 + 27,840) / 2 = 26,480 Therefore, the inventory turnover ratio = 42,160 / 26,480 = 1.59 (rounded to two decimal places) This means that the company turned over its stock 1.59 times during the year. Rounding to the nearest whole number, the answer is 2. Therefore, the answer is. The company turned over its stock 2 times during the year.
Read lesson note on Stock Valuation (JAMB)
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