Question

Highly Suspect Corp. has current liabilities of $401,000, a quick ratio of 1.50, inventory turnover of 3.70, and a current ratio of 3.60. What is the cost of goods sold for the company?

Answer 1

Answer:

$3,115,770

Explanation:

Given:

Current ratio = 3.60

Current liabilities = $401, 000

Quick ratio = 1.50

Inventory turnover = 3.70

Current ratio is calculated by dividing your current assets by your current liabilities.

                     $Current\ ratio = \frac{Current\ Assets}{Current\ Liabilities}$

                                     $3.60 = \frac{Current\ Assets}{401, 000}$

                     Current Assets = 3.60 × 401,000

                                               = $1,443,600

                    $Quick\ ratio = \frac{(Current\ Assets\ -\ Inventory)}{Current Liabilities}$

                    $1.50 = \frac{1,443,600\ -\ Inventory}{401,000}$

                    1.50 × 401,000 = 1,443,600 - Inventory

                    601,500 = 1,443,600 - Inventory

                    Inventory = 1,443,600 - 601,500

                                     = $842,100

                    $Inventory\ Turnover = \frac{Cost\ of\ Goods\ Sold}{Inventory}$

                    $3.70 = \frac{Cost\ of\ Goods\ Sold}{842,100}$

                    Cost of Goods Sold = 3.70 × 842,100

                                                      = $3,115,770