What effect would each method have on the Balance Sheet? What is the difference in the current ratio, if current libilities was $120,000 and current assets above inventory was $200,000 (no other assets are below inventory), when using the FIFO method vs. the average cost method? UnitsNetOperatingExpenses174,000UnitTotalDatePurchasedCostCostSales3,3006,80001/Jan$4.7015,51034,00035,34064,890385,00001/Apr01/Jul$5.006,20010,300$5.7001/Oct$6.3001/Dec10,200$7.0071,400221,14036,800Beginning Inventory consists of5,500 units at$4.21 per unit.Ending inventory was counted and holds12,560 units

Current Asset are shown under the Asset head of the balance sheet. In the given question Current…

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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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What effect would each method have on the Balance Sheet? What is the difference in the current ratio, if current libilities was $120,000 and current assets above inventory was $200,000 (no other assets are below inventory), when using the FIFO method vs. the average cost method?

Units
Net
Operating
Expenses
174,000
Unit
Total
Date
Purchased
Cost
Cost
Sales
3,300
6,800
01/Jan
$4.70
15,510
34,000
35,340
64,890
385,000
01/Apr
01/Jul
$5.00
6,200
10,300
$5.70
01/Oct
$6.30
01/Dec
10,200
$7.00
71,400
221,140
36,800
Beginning Inventory consists of
5,500 units at
$4.21 per unit.
Ending inventory was counted and holds
12,560 units

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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