Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. **E6.16 FIFO versus LIFO: Ratio Analysis.**Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO (First-In, First-Out) method to value its inventory and Company Z uses the LIFO (Last-In, First-Out) method. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why?| | Company X | Company Z ||-----------------------|-----------|-----------|| Sales | $110,000 | $110,000 || Cost of goods sold | 49,500 | 60,000 || Net income | 27,750 | 17,250 || Inventory | 21,000 | 10,500 || Current assets | 64,000 | 53,500 || Current liabilities | 22,000 | 22,000 |

As posted multiple sub parts we are answering only first three sub parts kindly repost the…

FIFO versus LIFO: Ratio Analysis. Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO method to value its inventory and Company Z uses the LIFO method to value its inventory. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why? Company X Company Z Sales... $110,000 49,500 27,750 21,000 64,000 $110,000 Cost of goods sold Net income .. Inventory. 60,000 17,250 10,500 53,500 22,000 Current assets Current liabilities.. 22,000

FIFO versus LIFO: Ratio Analysis. Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO method to value its inventory and Company Z uses the LIFO method to value its inventory. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why? Company X Company Z Sales... $110,000 49,500 27,750 21,000 64,000 $110,000 Cost of goods sold Net income .. Inventory. 60,000 17,250 10,500 53,500 22,000 Current assets Current liabilities.. 22,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: How is Day Sales in Inventory calculated?

A: Inventory turnover ratio: This is a financial measure that is used to evaluate as to how many times…

Q: How are days’ sales in inventory calculated, and what does it measure?

A: Numbers of days to sell inventory: This ratio is determined as the number of days a particular…

Q: When using a perpetual inventory system and the weighted-average inventory costing method, when does…

A: Perpetual inventory system: The method or system of maintaining, recording, and adjusting the…

Q: calculate cost of goods sold, gross margin and ending inventory using i) FIFO and ii) Weighted -…

A: The objective of this question is to calculate the cost of goods sold (COGS), gross margin, and…

Q: Please help: options for matching answers are trend analysis, vertical analysis, retained analysis…

A: Assets, liabilities and equity are three important component of accounting equation. After each and…

Q: Under the weighted-average method, the ending inventory is:

A: Under weighted average cost the average cost per unit change after every purchase or sale . and the…

Q: ost per unit of purchases over a period r decrease in purchases in relation to the

A: Data is unprocessed facts or figures that are not organzied.Information is processed and organized…

Q: What is inventory turnover Ratio? Explain its significance.

A: Explain the meaning of inventory turnover ratio and its significance:Inventory turnover ratio:…

Q: profit margin, and inventory turnover of the company. Explain what each calculated ratio tells you…

A: Financial ratios are quantitative measurements that are used to evaluate and examine several facets…

Q: How would I go about finding the previous reported sales, when I have the current sales and the…

A: Given: Current Sales Percentage increase in Sales

Q: 1. Journalize the adjustment for inventory shrinkage. 2. Journalize the adjustment for estimated…

A: Given: Merchandise inventory = $ 5,200 Inventory on June 30, 2018 = $ 4,900 Amount of Sold…

Q: How do you calculate inventory turnover ratio

A: Inventory turnover ratio indicates how fast a firm converting its inventory into the cost of goods…

Q: Describe implications of valuing inventory at net realizable value for financial statementsand…

A: Net realizable value means the value at which the inventory can be sold in the market reduced by the…

Q: Suppose Fine Chocolates Co. estimates bad debt under the aging method. Before adjusting entries at…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: multiple choice: Which of the following statements is TRUE? A. The inventory turnover ratio shows…

A: Ratio Analysis provides insights into the performance of the company based on various parameters.

Q: . Inventory turnover is calculated as __________ divided by __________. cost of goods sold;…

A: Ratios are used to measure the financial position of the organization with different kinds of ratios…

Q: Explain the inventory cost flow assumption: FIFO, LIFO, weighted average. Provide examples.

A: The company will purchase the inventory, and it will be sold more than its cost to earn revenue for…

Q: Define days' sales in inventory (what do the results mean). Provide an example

A: Days sales in inventory means how much days company will take to convert its inventory into sales.…

Q: factors affect inventory turnover ratio

A: The inventory turnover ratio is a financial ratio. It is the rate at which a company is managing its…

Q: How would you interpret an inventory turnover ratio of 12.4?

A: The question is based on the concept of ratio analysis and an inventory turnover ratio. Inventory…

Q: If a company understates its inventory, what are the effects on cost of goods sold and net income…

A: The cost of goods sold is calculated as difference between cost of goods available for sale and…

Question

Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio.

**E6.16 FIFO versus LIFO: Ratio Analysis.**

Presented below is financial data for two companies that are identical in every respect except that Company X uses the FIFO (First-In, First-Out) method to value its inventory and Company Z uses the LIFO (Last-In, First-Out) method. Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio. Which of the two companies is the better investment opportunity? Why?

| | Company X | Company Z |
|-----------------------|-----------|-----------|
| Sales | $110,000 | $110,000 |
| Cost of goods sold | 49,500 | 60,000 |
| Net income | 27,750 | 17,250 |
| Inventory | 21,000 | 10,500 |
| Current assets | 64,000 | 53,500 |
| Current liabilities | 22,000 | 22,000 |

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The inventory costinf method that best matches current costs with the current revenues is the 1) specific identificarion method 2) fifo method 3) lifo method 4) weighted average method 5) net method
1. Explain the effect of each inventory cost flow method on the company's net income 2. Recommed one method and explain the reasons for your recommendation
Define average days in inventory.
Define Inventory turnover ratio.
Define Inventory Turnover? Explain what the results mean and provide an example.
The cost of goods sold is based on the oldest purchases under which method of calculating inventory cost? O A. weighted average method O B. first in, first out (FIFO) O C. gross profit method O D. last in, first out (LIFO)
Stanley's inventory turnover ratio is?
Compute for each year the inventory turnover. (R