Determine the number of times stock was turned over during the period to the nearest figure?

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 – #27,840

 

A. 1
B. 2
C. 3
D. 4

Correct Answer:

Option B – 2

Explanation

Turnover ratio is the cost of goods sold divided by the average stock for the same period

Cost of goods sold = opening stock + purchases – closing stock
25,120 + 44,880 – 27,840 = 42,160

Average stock = opening stock + closing stock / 2
25,120 + 27,840 = 52960 / 2 = 26,480

Turn over = 42,160 / 26,480 = 1.59 times Approximately 2 times