W&B Corp. has current liabilities of $436,000, a quick ratio of .75, inventory turnover of 5.1, and a current ratio of 1.2. What is the cost of goods sold for the company?

W&B Corp. has current liabilities of $436,000, a quick ratio of .75, inventory turnover of 5.1, and a current ratio of 1.2. What is the cost of goods sold for the company? (Do not round intermediate calculations.)

  

Cost of goods sold

$

 

Explanation:

The only ratio given that includes cost of goods sold is the inventory turnover ratio, so it is the last ratio used. Since current liabilities is given, we start with the current ratio:

  

Current ratio = Current assets / Current liabilities

1.20 = Current assets / $436,000

Current assets = $523,200

  

Using the quick ratio, we solve for inventory:

  

Quick ratio = (Current assets − Inventory) / Current liabillities

Inventory = Current assets − (Quick ratio × Current liabilities)

Inventory = $523,200 − (.75 × $436,000)

Inventory = $196,200

  

Inventory turnover = COGS / Inventory

5.1 = COGS / $196,200

COGS = $1,000,620