Question# Xiomi Co. is a retailer dealing in a single product. Beginning inventory at January 1 of this year is zero, operating expenses for this same year are $5,000, and there are 2,000 common shares outstanding. The following purchases are made this year: ITI Cost $ 1,000 3,300 7,200 Units Per Unit $ 10 January March 100 300 11 June 600 12 October December Total 300 14 4,200 7,500 23,200 500 15 1800 Ending inventory at December 31 is 800 units. End-of-year assets, excluding inventories, amount to $75,000, of which $50,000 of the $75,000 are current. Current liabilities amount to $25,000, and long-term liabilities equal $10,000.

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Question# 3
Xiomi Co. is a retailer dealing in a single product. Beginning inventory at January 1 of this year is
zero, operating expenses for this same year are $5,000, and there are 2,000 common shares
outstanding. The following purchases are made this year:
Units
Per Unit
Cost
$ 1,000
3,300
7,200
4,200
7,500
23,200
January
March
100
$ 10
300
11
June
600
12
October
300
14
December
500
15
Total
1800
Ending inventory at December 31 is 800 units. End-of-year assets, excluding inventories, amount
to $75,000, of which $50,000 of the $75,000 are current. Current liabilities amount to $25,000, and
long-term liabilities equal $10,000.
Required:
a) Determine net income for this year under cach of the following inventory methods. Assume a
sales price of $25 per unit and ignore income taxes.
i) FIFO
ii) LIFO
iii) Average cost
b) Compute the following ratios under each of the inventory methods of FIFO, LIFO, and average
cost.
i) Current ratio
ii) Debt-to-equity ratio
iii) Inventory turnover
iv) Return on total assets
v) Gross margin as a percent of sales
vi) Net profit as a percent of sales
c) Discuss the effects of inventory accounting methods for financial statement analysis given the
results from parts (a) and (b).
Transcribed Image Text:Question# 3 Xiomi Co. is a retailer dealing in a single product. Beginning inventory at January 1 of this year is zero, operating expenses for this same year are $5,000, and there are 2,000 common shares outstanding. The following purchases are made this year: Units Per Unit Cost $ 1,000 3,300 7,200 4,200 7,500 23,200 January March 100 $ 10 300 11 June 600 12 October 300 14 December 500 15 Total 1800 Ending inventory at December 31 is 800 units. End-of-year assets, excluding inventories, amount to $75,000, of which $50,000 of the $75,000 are current. Current liabilities amount to $25,000, and long-term liabilities equal $10,000. Required: a) Determine net income for this year under cach of the following inventory methods. Assume a sales price of $25 per unit and ignore income taxes. i) FIFO ii) LIFO iii) Average cost b) Compute the following ratios under each of the inventory methods of FIFO, LIFO, and average cost. i) Current ratio ii) Debt-to-equity ratio iii) Inventory turnover iv) Return on total assets v) Gross margin as a percent of sales vi) Net profit as a percent of sales c) Discuss the effects of inventory accounting methods for financial statement analysis given the results from parts (a) and (b).
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