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1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIF numbers and (b) FIFO numbers.

1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIF numbers and (b) FIFO numbers.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes. LIFO inventory LIFO cost of goods sold FIFO inventory FIFO cost of goods sold Current assets (using LIFO) Current assets (using FIFO) Current liabilities Current ratio Inventory turnover Days' sales in inventory 1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIFO numbers and (b) FIFO numbers. (a) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using LIFO numbers. Current ratio Inventory turnover Days' sales in inventory Year 2 $ 330 910 $ $ Numerator 1 Denominator 390.0 / $ 910.0 / $ 400 865 390 460 175 Numerator 1 460.0 / $ $ Year 1 $ 280 850 305 850 360 385 155 400.0 / (b) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using FIFO numbers. 175.0 360.0 $ Denominator = 175.0 = x 365 = = Ratio 2.2 to 1 2.5 times 0 x 365 = Ratio 2.6 to 1 0 0
Transcribed Image Text:Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes. LIFO inventory LIFO cost of goods sold FIFO inventory FIFO cost of goods sold Current assets (using LIFO) Current assets (using FIFO) Current liabilities Current ratio Inventory turnover Days' sales in inventory 1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIFO numbers and (b) FIFO numbers. (a) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using LIFO numbers. Current ratio Inventory turnover Days' sales in inventory Year 2 $ 330 910 $ $ Numerator 1 Denominator 390.0 / $ 910.0 / $ 400 865 390 460 175 Numerator 1 460.0 / $ $ Year 1 $ 280 850 305 850 360 385 155 400.0 / (b) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using FIFO numbers. 175.0 360.0 $ Denominator = 175.0 = x 365 = = Ratio 2.2 to 1 2.5 times 0 x 365 = Ratio 2.6 to 1 0 0
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