sing the information from the requirements above, complete the 'Analysis'. (Calculate the ratios to the nearest 1 decimal lace.) Analyze the following for Displays Incorporated: Suppose Displays Incorporated decided to maintain its internal records using FIFO but to use LIFO for external reporting. Assuming e ending balance of inventory under LIFO would have been $114,000, calculate the LIFO reserve. FO reserve is: Assume Displays Incorporated $77,000 beginning balance of inventory comes from the base year with a cost index of 1.00. The st index at the end of 2021 of 1.1. Calculate the amount the company would report for inventory using dollar-value LIFO. ding inventory using dollar-value LIFO: Indicate whether each of the amounts below would be higher or lower when reporting inventory using LIFO (or dollar-value LIFO) stead of FIFO in periods of rising inventory costs and stable inventory quantities. Inventory turnover ratio Average days in inventory Gross profit ratio < Balance Sheet Analysis >
sing the information from the requirements above, complete the 'Analysis'. (Calculate the ratios to the nearest 1 decimal lace.) Analyze the following for Displays Incorporated: Suppose Displays Incorporated decided to maintain its internal records using FIFO but to use LIFO for external reporting. Assuming e ending balance of inventory under LIFO would have been $114,000, calculate the LIFO reserve. FO reserve is: Assume Displays Incorporated $77,000 beginning balance of inventory comes from the base year with a cost index of 1.00. The st index at the end of 2021 of 1.1. Calculate the amount the company would report for inventory using dollar-value LIFO. ding inventory using dollar-value LIFO: Indicate whether each of the amounts below would be higher or lower when reporting inventory using LIFO (or dollar-value LIFO) stead of FIFO in periods of rising inventory costs and stable inventory quantities. Inventory turnover ratio Average days in inventory Gross profit ratio < Balance Sheet Analysis >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![### Analysis for Displays Incorporated:
#### Requirement:
Using the information from the requirements above, complete the 'Analysis'. *(Calculate the ratios to the nearest 1 decimal place.)*
#### Analysis Tasks:
(a) **Calculate the LIFO reserve:**
- **Scenario:** Displays Incorporated decided to maintain its internal records using FIFO but to use LIFO for external reporting. Assuming the ending balance of inventory under LIFO would have been $114,000, calculate the LIFO reserve.
- **LIFO reserve is:**
- [Space for calculation]
(b) **Calculate the ending inventory using dollar-value LIFO:**
- **Scenario:** Assume Displays Incorporated's $77,000 beginning balance of inventory comes from the base year with a cost index of 1.00. The cost index at the end of 2021 is 1.1. Calculate the amount the company would report for inventory using dollar-value LIFO.
- **Ending inventory using dollar-value LIFO:**
- [Space for calculation]
(c) **Determine impact of LIFO on financial ratios:**
- **Instruction:** Indicate whether each of the amounts below would be higher or lower when reporting inventory using LIFO (or dollar-value LIFO) instead of FIFO in periods of rising inventory costs and stable inventory quantities.
1. **Inventory turnover ratio**
- [Space for indication]
2. **Average days in inventory**
- [Space for indication]
3. **Gross profit ratio**
- [Space for indication]
#### Navigation:
- Options to proceed to the balance sheet or continue with analysis are available.
##### Note:
Please fill in the calculations and indicators as per the analysis requirement for a comprehensive understanding.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe890579c-94a4-423d-91dd-4fb21feea66a%2F8732f69d-664d-42b6-bcb7-c0d235bf9be8%2Fqx2q6a3_processed.png&w=3840&q=75)
Transcribed Image Text:### Analysis for Displays Incorporated:
#### Requirement:
Using the information from the requirements above, complete the 'Analysis'. *(Calculate the ratios to the nearest 1 decimal place.)*
#### Analysis Tasks:
(a) **Calculate the LIFO reserve:**
- **Scenario:** Displays Incorporated decided to maintain its internal records using FIFO but to use LIFO for external reporting. Assuming the ending balance of inventory under LIFO would have been $114,000, calculate the LIFO reserve.
- **LIFO reserve is:**
- [Space for calculation]
(b) **Calculate the ending inventory using dollar-value LIFO:**
- **Scenario:** Assume Displays Incorporated's $77,000 beginning balance of inventory comes from the base year with a cost index of 1.00. The cost index at the end of 2021 is 1.1. Calculate the amount the company would report for inventory using dollar-value LIFO.
- **Ending inventory using dollar-value LIFO:**
- [Space for calculation]
(c) **Determine impact of LIFO on financial ratios:**
- **Instruction:** Indicate whether each of the amounts below would be higher or lower when reporting inventory using LIFO (or dollar-value LIFO) instead of FIFO in periods of rising inventory costs and stable inventory quantities.
1. **Inventory turnover ratio**
- [Space for indication]
2. **Average days in inventory**
- [Space for indication]
3. **Gross profit ratio**
- [Space for indication]
#### Navigation:
- Options to proceed to the balance sheet or continue with analysis are available.
##### Note:
Please fill in the calculations and indicators as per the analysis requirement for a comprehensive understanding.
![On January 1, 2021, Displays Incorporated had the following account balances:
| Accounts | Debit ($) | Credit ($) |
|---------------------------------------|-----------|-------------|
| Cash | 41,000 | |
| Accounts receivable | 38,000 | |
| Supplies | 44,000 | |
| Inventory | 77,000 | |
| Land | 246,000 | |
| Accounts payable | | 56,000 |
| Notes payable (5%, due next year) | | 39,000 |
| Common stock | | 205,000 |
| Retained earnings | | 146,000 |
| **Totals** | 446,000 | 446,000 |
From January 1 to December 31, the following summary transactions occurred:
a. Purchased inventory on account for $349,000.
b. Sold inventory on account for $665,000. The cost of the inventory sold was $329,000.
c. Received $594,000 from customers on accounts receivable.
d. Paid freight on inventory received, $43,000.
e. Paid $339,000 to inventory suppliers on accounts payable of $347,000. The difference reflects purchase discounts of $8,000.
f. Paid rent for the current year, $61,000. The payment was recorded to Rent Expense.
g. Paid salaries for the current year, $169,000. The payment was recorded to Salaries Expense.
Year-end adjusting entries:
a. Supplies on hand at the end of the year are $8,000.
b. Accrued interest expense on notes payable for the year.
c. Accrued income taxes at the end of December are $37,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe890579c-94a4-423d-91dd-4fb21feea66a%2F8732f69d-664d-42b6-bcb7-c0d235bf9be8%2F3glkl76_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, Displays Incorporated had the following account balances:
| Accounts | Debit ($) | Credit ($) |
|---------------------------------------|-----------|-------------|
| Cash | 41,000 | |
| Accounts receivable | 38,000 | |
| Supplies | 44,000 | |
| Inventory | 77,000 | |
| Land | 246,000 | |
| Accounts payable | | 56,000 |
| Notes payable (5%, due next year) | | 39,000 |
| Common stock | | 205,000 |
| Retained earnings | | 146,000 |
| **Totals** | 446,000 | 446,000 |
From January 1 to December 31, the following summary transactions occurred:
a. Purchased inventory on account for $349,000.
b. Sold inventory on account for $665,000. The cost of the inventory sold was $329,000.
c. Received $594,000 from customers on accounts receivable.
d. Paid freight on inventory received, $43,000.
e. Paid $339,000 to inventory suppliers on accounts payable of $347,000. The difference reflects purchase discounts of $8,000.
f. Paid rent for the current year, $61,000. The payment was recorded to Rent Expense.
g. Paid salaries for the current year, $169,000. The payment was recorded to Salaries Expense.
Year-end adjusting entries:
a. Supplies on hand at the end of the year are $8,000.
b. Accrued interest expense on notes payable for the year.
c. Accrued income taxes at the end of December are $37,000.
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