The following selected information has been compiled for Sherwood Park Inc. Sherwood Park owns a series of discount clothing stores in Western Canada.

You are the new accountant hired by Sherwood Park. The owner tells you that, based on sales growth, the company is doing so well that expansion plans are under discussion.

Required

a. Calculate the:

i. Inventory turnover for 2019 and 2020

ii. Number of days sales in inventory for 2019 and 2020

iii. Gross margin and gross margin ratio for 2018, 2019, and 2020

b. Do you agree with the owner about the success of Sherwood Park? If not, what do your calculations show that contradicts the owner’s opinion?

Transcribed Image Text:

2019 2018 $ 800,000 2020 Inventories Sales revenue $1,410,000 6,046,000 4,970,000 $1,300,000 5,500,000 4,490,000 4,160,000 3,300,000 | Cost of goods sold