LECTURE NOTES ON INVENTORIES

Nature of inventories
Inventories include:
• Assets held for sale in the ordinary course of business (finished goods),
• Assets in the production process for sale in the ordinary course of business (work in process), and
• Materials and supplies that are consumed in production (raw materials).

Whose inventory is it?

Goods in transit
• Shipping terms determine when title to goods passes to the purchaser.
a. FOB (free on board) shipping point—title passes to the buyer with the loading of goods at the
point of shipment.
b. FOB destination—legal title does not pass until the goods are received by the buyer.
• Goods shipped FOB shipping point belong to the buyer while they are in transit and should normally
be included in the buyer’s inventory while in transit.
• Goods shipped FOB destination belong to the seller while in transit and are normally included in the
seller’s inventory.

Goods on consignment
• Goods held by the dealer (consignee) for which title is held by the shipper (consignor).
• Consigned goods are included in the inventory of the consignor.

Conditional sales, installment sales, and repurchase agreements

• If title to the goods is retained by the seller, the seller may report as an asset the cost of the goods
less the purchaser’s equity in the goods such as established by collections.
• Generally however, in the usual case where the possibilities of default or return are low, the seller,
in anticipation of contract completion and ultimate passing of title, will recognize the transaction as
a regular sale and remove the goods from reported inventory at the time of sale.
• Repurchase agreements result in no sale being recorded; the inventory is thus not removed from
the books, and instead the “seller” records a liability for the proceeds of the “sale”, which more
accurately in substance is a short-term loan secured by inventory as collateral.

Measurement of inventories (PAS 2)

Inventories are required to be stated at the lower of cost and net realizable value (NRV).
Cost should include all
• costs of purchase (including taxes, transport, and handling) net of trade discounts received
• costs of conversion (including fixed and variable manufacturing overheads) and
• other costs incurred in bringing the inventories to their present location and condition

Inventory cost should not include:

• abnormal waste
• storage costs
• administrative overheads unrelated to production
• selling costs
• foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a
foreign currency
• interest cost when inventories are purchased with deferred settlement terms.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.

Fair value is the price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date. (PFRS 13)

Other measurement bases

Repossessed merchandise–fair value or best approximation of fair value
Trade-in inventory–net realizable value minus normal profit margin
Commodities of brokers-traders–fair value less costs to sell. Broker-traders are those who buy or sell
commodities for others or on their own account.
Agricultural, forest and mineral products–net realizable value
Agricultural produce at the point of harvest–fair value less costs to sell

Accounting for purchases (Gross and Net method)

Gross Net

Cash Deducted from Deducted from

discounts purchases/cost of purchases/cost of
inventory when inventory whether
taken taken or not
 Cash Deducted from Not accounted for
discounts purchases/cost of separately since
taken inventory (purchase already deducted
discounts) from purchases

Cash Included in Reported as other

discounts purchases/cost of expense
not taken inventory (purchase
discounts lost)

Inventory cost formulas

The purpose of an inventory valuation method is to allocate the total inventory cost of good available
for sale during the period between cost of goods sold and ending inventory.

Specific identification
• Required for inventories that are not ordinarily interchangeable and goods or services produced and
segregated for specific projects.
• The original cost of each item is identified, resulting in actual costs being accumulated for the specific
items on hand and sold.
• This method is consistent with the physical flow of goods (though note, it is not required that one
has to choose a cost-flow method which corresponds to the actual, underlying physical flow of
goods).
• Though theoretically attractive and useful when each inventory item is unique and has a high cost,
it is frequently not economically feasible (even if taking into account advances in technology),
particularly where inventory is composed of a great many items or identical items acquired at
different times and at different prices.
• It is subject to manipulation, as seller has the flexibility of selectively choosing specific items of
higher/lower-costing inventory depending on particular income goals at the time of sale.
• It is the least common method observed in practice.

Average cost method

• This method assigns the same average cost to each unit.
• Based on the assumption that goods sold should be charged at an average cost, with the average
being weighted by the number of units acquired at each price.
• It provides the same cost for similar items of equal utility.
• It does not permit profit manipulation.
• Its limitation is that inventory values may lag significantly behind current prices in periods of rapidly
rising or falling prices.

First-in, first-out method (FIFO)

• The first goods purchased are the first goods sold.
• Using the FIFO method, the accountant computes the cost of goods sold and ending inventory as if
the first items purchased are the first to be sold, leaving the most recently purchased items in
inventory.
• This often matches the physical flow of goods.
• FIFO affords little opportunity for profit manipulation.
• FIFO best approximates the current replacement value of ending inventory.

Comparison of methods: cost of goods sold and ending inventory

The average cost method:
• Differs from the other methods in that no assumption is made about the sale of specific units.
• Rather, all sales are assumed to be of the “average” unit at the average cost per unit.
• The gross profit margin tends to follow a similar pattern to FIFO in response to changing prices.
• Generally provides inventory values similar to FIFO values, since average costs are heavily
influenced by current costs.

FIFO:
• In a period of rising prices, matches oldest low-cost inventory with rising sales prices, thus
expanding the gross profit margin.
• In a period of declining prices, oldest high-cost inventory is matched with declining sales prices,
thus narrowing the gross profit margin.
• Inventories are reported on the balance sheet at or near current costs.

Specific identification:
• Can produce any variety of results depending on which particular units are selected for shipment.

Illustrative Problem – Cost flow assumptions

The following information has been extracted from the records of Praktis Corporation about one of its
products.
Date No. of Units Unit Cost Total Cost
January 1 Beginning balance 1,600 P14.00 P22,400
January 6 Purchased 600 14.10 8,460
February 5 Sold @ P24.00 per unit 2,000
March 19 Purchased 2,200 14.70 32,340
March 24 Purchase returns 160 14.70 2,352
 Date No. of Units Unit Cost Total Cost
April 10 Sold @ P24.20 per unit 1,400
June 22 Purchased 16,800 15.00 252,000
July 31 Sold @ P26.50 per unit 3,600
August 4 Sales returns @ P26.50 per unit 40
September 4 Sold @ P27.00 per unit 7,000
November 15 Purchased 1,000 16.00 16,000
December 28 Sold @ P30.00 per unit 6,200

REQUIRED:
Compute for the closing inventory under each of the following pricing methods? (Round unit costs to
two decimal places.)
1. FIFO – Periodic 3. Weighted average - Periodic
2. FIFO – Perpetual 4. Weighted average – Perpetual (Moving average)

SOLUTION:

FIFO – Periodic
From November 15 purchases (1,000 units x P16.00) - P16,000
From June 22 purchases (880 units x P15.00) - 13,200
Total P29,200

FIFO – Perpetual
Purchased Sold Balance
Unit Unit Unit
Units Cost Total Cost Units Cost Total Cost Units Cost Total Cost
Jan. 1 1,600 14.00 22,400
Jan. 6 600 14.10 8,460 1,600 14.00 22,400
600 14.10 8,460
2,200 30,860
Feb. 5 1,600 14.00 22,400
400 14.10 5,640 200 14.10 2,820
Mar. 19 2,200 14.70 32,340 200 14.10 2,820
2,200 14.70 32,340
2,400 35,160
Mar. 24 (160) 14.70 (2,352) 200 14.10 2,820
2,040 14.70 29,988
2,240 32,808
Apr. 10 200 14.10 2,820
1,200 14.70 17,640 840 14.70 12,348
Jun. 22 16,800 15.00 252,000 840 14.70 12,348
16,800 15.00 252,000
17,640 264,348
Jul. 31 840 14.70 12,348
2,760 15.00 41,400 14,040 15.00 210,600
Aug. 4 (40) 15.00 (600) 14,080 15.00 211,200
Sep. 4 7,000 15.00 105,000 7,080 15.00 106,200
Nov. 15 1,000 16.00 16,000 7,080 15.00 106,200
1,000 16.00 16,000
8,080 122,200
Dec. 28 6,200 15.00 93,000 880 15.00 13,200
1,000 16.00 16,000
1,880 29,200

Average – Periodic
Total cost (1,880 units x P14.92) - P28,050

Weighted average unit cost (P328,848/22,040 units) - P14.92

Average – Perpetual (Moving average)

Purchased Sold Balance
Unit Unit Unit
Units Cost Total Cost Units Cost Total Cost Units Cost Total Cost
Jan. 1 1,600 14.00 22,400
Jan. 6 600 14.10 8,460 1,600 14.00 22,400
600 14.10 8,460
2,200 14.03 30,860
Feb. 5 2,000 14.03 28,060 200 14.03 2,800
Mar. 19 2,200 14.70 32,340 200 14.03 2,800
2,200 14.70 32,340
2,400 14.64 35,140
Mar. 24 (160) 14.70 (2,352) 200 14.03 2,800
2,040 14.70 29,988
2,240 14.64 32,788
Apr. 10 1,400 14.64 20,496 840 14.64 12,292
 Jun. 22 16,800 15.00 252,000 840 14.64 12,292
16,800 15.00 252,000
17,640 14.98 264,292
Jul. 31 3,600 14.98 53,928 14,040 14.98 210,364
Aug. 4 (40) 14.98 (599) 14,080 14.98 210,963
Sep. 4 7,000 14.98 104,860 7,080 14.98 106,103
Nov. 16 1,000 16.00 16,000 7,080 14.98 106,103
1,000 16.00 16,000
8,080 15.11 122,103
Dec. 28 6,200 15.11 93,682 1,880 15.11 28,421

Accounting for inventory write down

The cost of inventories may not be recoverable if:
• those inventories are damaged
• they have become wholly or partially obsolete
• their selling prices have declined
• the estimated costs of completion or the estimated costs to be incurred to make the sale have
increased

Why write down to NRV?

The practice of writing inventories down below cost to net realizable value is consistent with the view
that assets should not be carried in excess of amounts expected to be realized from their sale or use.

How to write down to NRV?

Inventories are usually written down to net realizable value item by item.

Write down to NRV of materials and production supplies

Materials and other supplies held for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
However, when a decline in the price of materials indicates that the cost of the finished products exceeds
net realizable value, the materials are written down to net realizable value. In such circumstances, the
replacement cost of the materials may be the best available measure of their net realizable value.

Reversal of inventory write down

When the circumstances that previously caused inventories to be written down below cost no longer
exist or when there is clear evidence of an increase in net realizable value because of changed economic
circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of
the original write-down) so that the new carrying amount is the lower of the cost and the revised net
realizable value.

Recognition as an Expense
When inventories are sold, the carrying amount of those inventories shall be recognized as an expense
in the period in which the related revenue is recognized. The amount of any write-down of inventories
to net realizable value and all losses of inventories shall be recognized as an expense in the period the
write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from
an increase in net realizable value, shall be recognized as a reduction in the amount of inventories
recognized as an expense in the period in which the reversal occurs.

Inventories allocated to another asset (for example, inventory used as a component of self-constructed
property, plant or equipment) are recognized as an expense during the useful life of that asset.

Inventory systems
Periodic inventory system
• An inventory system in which only revenue is recorded each time a sale occurs; the inventory
balance is determined by a periodic physical inventory.
• Using the periodic system, items must be physically counted to determine quantities on hand.
• Quantities of items sold are determined indirectly by subtracting the units on hand from the sum of
the units in the beginning inventory and units purchased during the year.

Perpetual inventory system

• An inventory system which provides a continuous summary of goods on hand.
• Entries for sales, cost of goods sold, and the reduction of inventory are recorded for each sales
transaction.
• A continuous record of quantities in inventory and items sold is maintained.
• Benefits of a perpetual system.
1. Provides a continuous check and control mechanism on inventory.
2. Facilitates purchasing and production planning
3. Ensures adequate on-hand inventories
4. Helps identify and measure the magnitude of inventory shrinkage.
5. Advances in, and cost reductions relating to, technology have made perpetual systems much
more feasible, and it’s a good thing – today’s fast-paced, competitive business environment
magnifies the importance of a perpetual system’s benefits.
Purchase commitments
• A lock on the inventory purchase price in advance. An executory contract (an exchange of promises
about future actions).
• No journal entry is required to record an asset and liability at the commitment date.
• However, when price declines take place subsequent to the commitment and it is outstanding at the
end of an accounting period, the loss is recorded just as losses with goods on hand are recognized
(i.e., as with LCM, in the period in which the inventory price decline took place).
• Acquisition of the goods in a subsequent period is also recorded.
1. Purchases are recorded at current market value.
2. Difference between current market value of goods and total amount owed per the purchase
commitment is reflected by the removal of the estimated loss on purchase commitments account
(a balance sheet account created above).
• Current loss recognition is not appropriate when:
1. Commitments can be cancelled,
2. Commitments provide for price adjustment,
3. Hedging transactions prevent losses, or
4. Declines do not suggest reductions in sales prices.
• If, prior to delivery, the market price increases, the estimated loss on purchase commitments
account is reduced and a gain is recorded, though such “recovery” can only be recognized to the
extent of the original loss recorded.

Using inventory information for financial analysis

Inventory balances are often used to measure a company’s efficiency in using that asset to generate
sales.

Inventory turnover evaluates the inventory position and the appropriateness of its size (cost of goods
sold/ average inventory).

Number of days’ sales in inventory gives average time it takes to turn over the inventory (Average
inventory/ average daily cost of goods sold) (or number of days in the year/ inventory turnover rate).

ILLUSTRATIVE PROBLEMS

1. Ovation Company asks you to review its December 31 inventory values and prepare the necessary
adjustments to the books. The following information is given to you.
a. Ovation uses the periodic method of recording inventory. A physical count reveals P2,348,900
inventory on hand at December 31.
b. Not included in the physical count of inventory is P134,200 of merchandise purchased on
December 15 from Standing. This merchandise was shipped f.o.b. shipping point on December
29 and arrived in January. The invoice arrived and was recorded on December 31.
c. Included in inventory is merchandise sold to Oval on December 30, f.o.b. destination. This
merchandise was shipped after it was counted. The invoice was prepared and recorded as a
sale on account for P128,000 on December 31. The merchandise cost P73,500, and Oval
received it on January 3.
d. Included in inventory was merchandise received from Owl on December 31 with an invoice price
of P156,300. The merchandise was shipped f.o.b destination. The invoice, which has not yet
arrived, has not been recorded.
e. Not included in inventory is P85,400 of merchandise purchased from Oxygen Industries. The
merchandise was received on December 31 after the inventory had been counted. The invoice
was received and recorded on December 30.
f. Included in inventory was P104,380 of inventory held by Ovation on consignment from Ovoid
Industries.
g. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was
shipped after it was counted. The invoice was prepared and recorded as a sale for P189,000 on
December 31. The cost of this merchandise was P105,200, and Kemp received the merchandise
on January 5.
h. Excluded from inventory was carton labeled “Please accept for credit.” This carton contains
merchandise costing P15,000 which had been sold to a customer for P25,000. No entry had
been made to the books to reflect the return, but none of the returned merchandise seemed
damaged.
The adjusted inventory cost of Ovation Company at December 31 should be

2. The inventory on hand at December 31 for Fair Company valued at a cost of P947,800. The following
items were not included in this inventory amount:
a. Purchased goods, in transit, shipped FOB destination invoice price P32,000 which included
freight charges of P1,600.
b. Goods held on consignment by Fair Company at a sales price of P28,000, including sales
commission of 20% of the sales price.
c. Goods sold to Garcia Company, under terms FOB destination, invoiced for P18,500 which
includes P1,000 freight charges to deliver the goods. Goods are in transit.
d. Purchased goods in transit, terms FOB seller, invoice price P48,000, freight cost, P3,000.
e. Goods out on consignment to Manil Company, sales price P36,400, shipping cost of P2,000.
Assuming that the company's selling price is 140% of inventory cost, the adjusted cost of Fair
Company's inventory at December 31 should be
Use the following information for the next two questions:
Roweena Corporation began operations in 2015. In 2015 it incurred the following expenditures in
purchasing materials for producing its product:
• Purchase price of raw materials = P3,000,000
• Import duty and other non-refundable purchase taxes = P800,000
• Refundable purchase taxes = P100,000
• Freight costs for bringing the goods from the supplier to the factory raw material storeroom =
P300,000
• Costs of unloading the materials into the raw material storeroom = P2,000
• Packaging = P200,000
On 31 December 2015 the entity received P53,000 volume rebate from a supplier for purchasing more
than P1,500,000 from the supplier during the year.
The entity incurred the following additional costs in the production run:
• Salary of the machine workers in the factory = P500,000
• Salary of factory supervisor = P300,000
• Depreciation of the factory building and equipment used for production process = P60,000
• Consumables used in the production process = P20,000
• Depreciation of vehicle used to transport the goods from the raw materials storeroom to the machine
floor = P40,000
• Factory electricity usage charges = P30,000
• Factory rental = P100,000
• Depreciation and maintenance of the entity’s vehicle used by the factory supervisor (50 per cent for
official use and 50 per cent for personal use) = P20,000. Private use of the vehicle is an employee
benefit.
During 2015 the entity incurred the following administration expenses:
• Depreciation of the administration building = P50,000
• Depreciation and maintenance of vehicles used by the administrative staff = P15,000
• Salaries of the administration personnel = P305,000
Of the administration expenses 20 per cent are attributable to administering the factory. The rest of
the administration expenses are attributable, in equal proportion, to the sales and other non-production
operations (eg financing, tax and corporate secretarial functions).

In 2015 the entity incurred the following selling expenses:

• Advertising costs = P30,000
• Depreciation and maintenance of vehicles used by the sales staff = P10,000
• Salary of the administration personnel = P600,000

3. The total costs of purchase is

4. The total costs of conversion is

5. Buyer Co. regularly buys shirts from Vendor Company and is allowed trade discounts of 20% and
10% from the list price. Buyer purchased shirts from Vendor on May 27 and received an invoice
with a list price of P100,000 and payment terms 2/10, n/30. If Buyer uses the net method of
recording purchases, the journal entry to record the payment on June 8 will be

6. Catapult Corp. purchased merchandise during 2015 on credit for P200,000; terms 2/10, n/30. All
of the gross liability except P40,000 was paid within the discount period. The remainder was paid
within the 30-day term. At the end of the annual accounting period, December 31, 2015, 90% of
the merchandise had been sold and 10% remained in inventory. The entity has no beginning
inventory. The entity uses net method of recording purchases.
If the entity used the gross method of recording purchases instead of the net method, the reported
cost of goods sold would have been

Use the following information for the next two questions.

Transactions for the month of June were:
Purchases Units Unit cost Total cost
June 1 (balance) 400 P3.20 P 1,280
3 1,100 3.10 3,410
7 600 3.30 1,980
15 900 3.40 3,060
22 250 3.50 875
3,250 P10,605
Sales
June 2 300 @ P5.50
6 800 @ 5.50
9 500 @ 5.50
10 200 @ 6.00
18 700 @ 6.00
25 150 @ 6.00
2,650
7. Assuming that perpetual inventory records are kept in pesos, the ending inventory on a FIFO basis
is
8. Assuming that perpetual inventory records are kept in units only, the ending inventory on an
average-cost basis is

Use the following information for the next two questions.

Maximilian uses the perpetual inventory system. Maximilian's inventory transactions for the month of
August were as follows:
Total
No. Unit cost cost
01 Aug. Beg. inventory 20 P4.00 P80.00
07 Aug. Purchases 10 4.20 42.00
10 Aug. Purchases 20 4.30 86.00
12 Aug. Sales 15 ? ?
16 Aug. Purchases 20 4.60 92
20 Aug. Sales 40 ? ?
28 Aug. Sales returns 3 ? ?

9. Using the information, assume that the Maximilian uses the FIFO cost flow method and that the
sales returns relate to the 20 August sales. The sales return should be costed back into inventory
at what unit cost?

10. Assuming that Maximilian uses the weighted average cost flow method, the 12 August sales should
be costed at what unit cost?

Use the following information for the next two questions.

Orang Dampuan Co. wholesales bicycles. It uses the perpetual inventory system. The company's
reporting date is 31 December. At 1 December 2015, inventory on hand consisted of 350 bicycles at
P820 each and 43 bicycles at P850 each. During the month ended 31 December 2015, the following
inventory transactions took place (all purchase and sales transactions are on credit):
Dec. 02 Sold 300 bicycles for P1,200 each.
03 Five bicycles were returned by a customer.
They had originally cost P820 each and were
sold for P1,200 each.
09 Purchased 55 bicycles at P910 each.
13 Purchased 76 bicycles at P960 each.
15 Sold 86 bicycles for P1,350 each.
16 Returned one damaged bicycles to the supplier.
This bicycle had been purchased on 9
December.
22 Sold 60 bicycles for P1,250 each.
26 Purchased 72 bicycles at P980 each.
29 Two bicycles, sold on 22 December, were
returned by a customer. The bicycles were
badly damaged so it was decided to write them
off. They had originally cost P910 each.

11. The cost of inventory as of December 31, 2015 using moving average method is (Round unit costs
to the nearest peso)

12. The cost of goods sold for the month of December using FIFO method is

13. An entity has partially-completed inventory located in its factory, to which the following estimates
relate:
Production costs incurred to date P268,000
Production costs to complete 20,000
Transport costs to customer 5,000
Future selling costs 10,000
Selling price 300,000
At what amount should the entity report the inventory on its statement of financial position?

14. The closing inventory at cost of a company at 31 December 2015 amounted to P284,700. The
following items were included at cost in the total:
• 400 coats, which had cost P80 each and normally sold for P150 each. Owing to a defect in
manufacture, they were all sold after the reporting date at 50% of their normal price. Selling
expenses amounted to 5% of the proceeds.
• 800 skirts, which had cost P20 each. These too were found to be defective. Remedial work in
February 2016 cost P5 per skirt, and selling expenses for the batch totaled P800. They were
sold for P28 each.
What should the inventory value be according to PAS 2 Inventories after considering the above
items?
15. The Refenjol Corporation included the following in its unadjusted trial balance as of December 31,
2015:
Inventory, 12/31/14 P 19,450,000
Purchases 127,850,000
Available for sale P147,300,000
The inventory at December 31, 2015 was counted at a cost of P14.5 million. This includes P500,000
of slow moving inventory that is expected to be sold for a net amount of P300,000.
The cost of sales for the year ended December 31, 2015 is

16. Alcala Company installs replacement siding, windows, and louvered glass doors for family homes.
At December 31, 2015, the balance of inventory account was P502,000, and the allowance for
inventory writedown was P33,000. The inventory cost and other data at December 31, 2015, are
as follows: (amounts in thousands)
Replace
ment Sales Normal
Item Cost Cost Price NRV Profit
A P 89 P 86 P 91 P 87 P 5
B 94 92 93 85 7
C 125 135 129 111 10
D 194 114 205 197 20
Total P502 P427 P518 P480 P32
The gain on reversal of inventory write down is

17. Caravana Development Corporation bought a 10-hectare land in Novaliches, to be improved,

subdivided into lots, and eventually sold. Purchase price of the land was P58,000,000. Taxes and
documentation expenses on the transfer of the property amounted to P800,000. The lots were
classified as follows:
Lot Number Selling price Total
class of lots per lot clearing costs
A 10 P1,000,000 None
B 20 800,000 P1,000,000
C 40 700,000 3,000,000
D 50 600,000 8,000,000
Purchase and improvement costs allocated for class B lots under the relative sales value method of
inventory valuation are

Use the following information for the next two questions.

On November 15, 2014, Socrates entered in to a commitment to purchase 200,000 units of raw material
X for P8,000,000 on March 15, 2015. Socrates entered into this purchase commitment to protect itself
against the volatility in the price of raw material X. By December 31, 2014, the purchase price of
material X had fallen to P35 per unit.

18. How much will be recognized as loss on purchase commitment on March 15, 2015 if the price of the
material had fallen further to P32 per unit?

19. How much will be recognized as gain on purchase commitment on March 15, 2015 if the price of the
material had risen to P42 per unit?

20. On January 1, 2015, Pastille Corp. signed a three-year noncancelable purchase contract, which
allows Pastille to purchase up to 500,000 units of a computer part annually from Pyramid Supply
Co. at P10 per unit and guarantees a minimum annual purchase of 100,000 units. During 2015, the
part unexpectedly became obsolete. Pastille had 250,000 units of this inventory at December 31,
2015, and believes these parts can be sold as scrap for P2 per unit. What amount of probable loss
from the purchase commitment should Pastille report in its 2015 profit or loss?

21. The following information for Bagulin Industries was taken from the company's financial statements
(amounts in thousands):
2015 2014
Sales P24,000 P18,000
Cost of goods sold 19,600 13,900
Inventory 1,400 1,200
Accounts receivable 3,900 3,600
Net income 560 320
What is the inventory turnover for the year 2015?