FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260823875
Author: PHILLIPS
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 13, Problem 8Q
From last year to this year, Colossal Company’s
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If a company’s current ratio declined in a year during whichits quick ratio improved, which of the following is the mostlikely explanation?a. Inventory is increasing.b. Inventory is declining.c. Receivables are being collected more rapidly than inthe past.d. Receivables are being collected more slowly than inthe past.
An analyst observes a decrease in a company’s inventory turnover. Which of the following would most likely explain this trend? B . Due to problems with obsolescent inventory last year, the company wrote off a large amount of its inventory at the beginning of the period.
A manufacturer reported an inventory turnover ratio of 8.6 last year. During the current year, management introduced a new inventory control system that was expected to reduce average inventorylevels by 25 percent without affecting sales volume. Given these circumstances, would you expectthe inventory turnover ratio to increase or decrease during the current year? Explain.
Chapter 13 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...
Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MCCh. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 10MECh. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 12MECh. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 1CPCh. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Prob. 6CPCh. 13 - Prob. 7CPCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PACh. 13 - Prob. 1PBCh. 13 - Prob. 2PBCh. 13 - Prob. 3PBCh. 13 - Prob. 4PBCh. 13 - Prob. 5PBCh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PBCh. 13 - Prob. 1SDCCh. 13 - Prob. 2SDCCh. 13 - Prob. 5SDCCh. 13 - Prob. 6SDCCh. 13 - Prob. 7SDCCh. 13 - Prob. 1CC
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- Hubble Space Incorporated has the following data which includes inventory conversion period or ICP of the firms against which it benchmarks. The firm's new manager is looking into the company on how he could reduce its inventory enough to reduce its ICP to the benchmarks' average. If this were done, by how much would inventories decrease? Assume a 365-day year. Cost of goods sold =P85,000; Inventory =P20,000; Inventory conversion period (ICP) =85.88; Benchmark inventory conversion period (ICP) =38.00 * P 7,316 P11,151 P 9,032 P10,036 O P 8,129arrow_forwardPedee Companys inventory turnover in days is 80 days. Which of the following actions could help to improve that ratio? a. Increase the sales price. b. Increase manufacturing costs. c. Reduce the cost of goods sold. d. Reduce average inventory. e. All of these.arrow_forwardYou are analyzing ABC Company, a computer manufacturer. You notice that inventory turnover this year is significantly lower than in prior years. You also notice that accounts receivable turnover is significantly lower this year when compared to previous years. Provide three explanations that would be consistent with your observation for inventory turnover and include an explanation of whether these would be of concern to you, as well as what the effect might be on the next period's financial results. In addition, provide three explanations that would be consistent with your observation of the accounts receivable turnover, and explain whether these would be of concern to you.arrow_forward
- Which of the following ratios would a company want to see decrease over time? ROA Days Sales in Recievables Inventory turnover ROE Current Ratioarrow_forwardPool Corporation, Incorporated, reported in its recent annual report that "In 2010, our industry experienced some price deflation.... In 2011, our industry experienced more normalized price inflation of approximately 2.6 percent overall despite price deflation for certain chemical products." This suggests that in some years Pool's overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year. Purchase and sales data are presented below. Inventory Item A Inventory Item B Transaction Units Beginning inventory 100 Purchases, February 7 140 Unit Cost $ 6.6 8.6 Units Unit Cost 100 $ 6.6 140 Purchases, March 16 Sales, April 28 160 270 9.6 160 270 5.6 3.6 Required: 1. Compute cost of goods sold for each of the two items separately using the FIFO and LIFO inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms…arrow_forwardPool Corporation Inc. reported in its recent annual report that the industry experienced some price deflation one year followed by more normalized price inflation of approximately 2 percent overall despite price deflation for certain chemical products. This suggests that in some years Pool's overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year. Purchase and sale information are presented below. Pool uses a perpetual inventory system. Transaction Beginning inventory Purchases, February 7 Sales, February 28 Purchases, March 16 Sales, April 28 Item A Item B FIFO Inventory Item A Unit Cost Cost of Sales Units 40 80 50 100 110 $6 8 Weighted-Average 99 Inventory Item B Unit Cost Required: 1. Compute the cost of sales for each of the two items separately using the FIFO and weighted average cost inventory costing methods. (Do not…arrow_forward
- hrl.3arrow_forwardIf prices are rising and a company is using LIFO, large purchases of inventory near the end of the year will: O increase income taxes paid. A O decrease income taxes paid. not change the amount of income taxes paid. either increase or decrease income taxes paid based on the sales price of the inventory. O There is not enough information to answer the question.arrow_forwardThe gross profit technique implies that A. The value of the inventory has not grown from prior years. B. The gross profit remains at the same level as in previous years. C. The correlation between sales and gross profit is consistent over time. D. Compared to prior years, neither sales nor cost of items sold have changed.arrow_forward
- A company follows the LIFO inventory method and is experiencing rising costs. What impact will this have on its financial statements during a period of increasing prices? a b C d Higher cost of goods sold and lower net income Lower cost of goods sold and higher net income. Lower inventory turnover and higher gross profit margin. Higher inventory turnover and lower gross profit margin.arrow_forwardThe analysis of Inventory Turnover Ratio is as follows: 2015: 4.34 2016: 3.15 2017: 4.76 2018: 2.94 2019: 5.32 a. What is the trend analysis for that Inventory Turnover Ratio and why it is increasing/decreasing?arrow_forwardWilma Company experienced a P500,000 decline in the market value of inventory at the end of the first quarter. The entity had expected this decline to reverse in the second quarter, and in fact, the second quarter recovery exceeded the previous decline by P100,000. What amount of gain or loss should be reported in the interim statements for the first and second quarters? ---------------- Choices: First quarter Second quarter a. 500,000 loss. 500,000 gain b. 500,000 loss 600,000 gain c. 500,000 loss 100,000 gain d. 0 0arrow_forward
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Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License