Answered

the intramural sports club reports sales revenue of $740,000. inventory at both the beginning and end of the year totals $200,000. the inventory turnover ratio for the year is 3.0. what amount of gross profit does the company report in its income statement?

Answer :

The gross profit that  the company will report in its income statement will be $440,000.

Gross profit = revenue - costs of goods sold

For the Intramural Sports Club, revenue = $740,000.

Finding the cost of goods sold  COGS

Inventory turnover = COGS/ average inventory

inventory turnover= 3.0

Average inventory = beginning plus closing inventory /2

in this case, average inventory =$200,000/2

=$100,000

Therefor, 3.0 = COGS/ $100,000

COGS = $100,000 x 3.0

COGS =$300,000

Gross profits= $740,000- $300,000

Gross profit =$440,000

To know more about Average inventory refer:

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