2014 2013 Inventories Finished goods Work in process Raw materials and supplies $232,893 7,068 49,937 $244,379 10,516 43,861 289,898 298,756 82,085 Less: LIFO reserve ৪6,025 Total (as reported) $203,873 $216,671 Cost of goods sold Current assets (as reported) Current liabilities $809,956 $561,395 $343,405 $780,771 $669,340 $432,321 Suppose the following information is from the 2014 annual report of American Greetings Corporation (all dollars in thousands). The notes to the company's financial statements also include the following information. Finished products, work in process, and raw material inventories are carried at the lower-of-cost-or-market. The last-in, first-out (LIFO) cost method is used for approximately 75% of the domestic inventories in 2014 and approximately 70% in 2013. The foreign subsidiaries principally use the first-in, first-out (FIFO) method. Display material and factory supplies are carried at average-cost. Instructions 1. Define each of the following: finished goods, work in process, and raw materials. 2. What might be a possible explanation for why the company uses FIFO for its nondomestic inventories? 3. Calculate the company's inventory turnover and days in inventory for 2013 and 2014. (2012 inventory was $182,618.) Discuss the implications of any change in the ratios. 4. What percentage of total inventory does the 2014 LIFO reserve represent? If the company used FIFO in 2014, what would be the value of its inventory? Do you consider this difference a "material" amount from the perspective of an analyst? Which value accurately represents the value of the company's inventory? 5. Calculate the company's 2014 current ratio with the numbers as reported, then recalculate after adjusting for the LIFO reserve.
2014 2013 Inventories Finished goods Work in process Raw materials and supplies $232,893 7,068 49,937 $244,379 10,516 43,861 289,898 298,756 82,085 Less: LIFO reserve ৪6,025 Total (as reported) $203,873 $216,671 Cost of goods sold Current assets (as reported) Current liabilities $809,956 $561,395 $343,405 $780,771 $669,340 $432,321 Suppose the following information is from the 2014 annual report of American Greetings Corporation (all dollars in thousands). The notes to the company's financial statements also include the following information. Finished products, work in process, and raw material inventories are carried at the lower-of-cost-or-market. The last-in, first-out (LIFO) cost method is used for approximately 75% of the domestic inventories in 2014 and approximately 70% in 2013. The foreign subsidiaries principally use the first-in, first-out (FIFO) method. Display material and factory supplies are carried at average-cost. Instructions 1. Define each of the following: finished goods, work in process, and raw materials. 2. What might be a possible explanation for why the company uses FIFO for its nondomestic inventories? 3. Calculate the company's inventory turnover and days in inventory for 2013 and 2014. (2012 inventory was $182,618.) Discuss the implications of any change in the ratios. 4. What percentage of total inventory does the 2014 LIFO reserve represent? If the company used FIFO in 2014, what would be the value of its inventory? Do you consider this difference a "material" amount from the perspective of an analyst? Which value accurately represents the value of the company's inventory? 5. Calculate the company's 2014 current ratio with the numbers as reported, then recalculate after adjusting for the LIFO reserve.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Hello, Please I want the solution for numbers 4 & 5. Thanks.
Transcribed Image Text:2014
2013
Inventories
Finished goods
Work in process
Raw materials and supplies
$232,893
7,068
49,937
$244,379
10,516
43,861
289,898
298,756
82,085
Less: LIFO reserve
৪6,025
Total (as reported)
$203,873
$216,671
Cost of goods sold
Current assets (as reported)
Current liabilities
$809,956
$561,395
$343,405
$780,771
$669,340
$432,321
Suppose the following information is from the 2014 annual report of American Greetings Corporation (all dollars
in thousands). The notes to the company's financial statements also include the following information. Finished
products, work in process, and raw material inventories are carried at the lower-of-cost-or-market. The last-in,
first-out (LIFO) cost method is used for approximately 75% of the domestic inventories in 2014 and
approximately 70% in 2013. The foreign subsidiaries principally use the first-in, first-out (FIFO) method. Display
material and factory supplies are carried at average-cost. Instructions
1. Define each of the following: finished goods, work in process, and raw materials.
2. What might be a possible explanation for why the company uses FIFO for its nondomestic inventories?
3. Calculate the company's inventory turnover and days in inventory for 2013 and 2014. (2012 inventory was
$182,618.) Discuss the implications of any change in the ratios.
4. What percentage of total inventory does the 2014 LIFO reserve represent? If the company used FIFO in 2014,
what would be the value of its inventory? Do you consider this difference a "material" amount from the
perspective of an analyst? Which value accurately represents the value of the company's inventory?
5. Calculate the company's 2014 current ratio with the numbers as reported, then recalculate after adjusting for
the LIFO reserve.
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