Holliman Corp. has current liabilities of $407,000, a quick ratio of 1.90, inventory turnover of 4.50, and a current ratio of 3.40. What is the cost of goods sold for the company?

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aristeus aristeus · Answer 1 · 2020-01-31T07:07:05+01:00

Answer:

Cost of goods will be $4670325

Explanation:

We have given current liabilities = $407000

A quick ratio = 1.90

Current ratio is 3.40 and inventory turnover = 4.50

We know that current ratio is the ratio of current assets and current liabilities

So [tex]3.4=\frac{current\ assets}{current\ liabilities}[/tex]

So current assets = $1383800

Now quick ratio is equal to = [tex]\frac{current\ assets-inventory}{curtrent\ liabilities}[/tex]

So [tex]0.85=\frac{1383800-inventory}{407000}\\[/tex]

Inventory = $1037850

Inventory turnover is given 4.5

So [tex]4.5=\frac{cost\ of\ goods\ sold}{average\ inventory}[/tex]

[tex]4.5=\frac{cost\ of\ goods\ sold}{1037850}[/tex]

So cost of goods sold = 4.5×$1037850 = $4670325