Inventory: Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business. First in first out: In case of First in, first out method, also known as FIFO method, the inventory which was bought first will also be the first one to be taken out. Last in first out: In case of Last in, First out, also known as LIFO method, the inventory which was bought in the last will be taken out first. Inventory turnover ratio: It depicts the fraction of inventory sold or used by the company within a fiscal year. It states a ratio which shows the number of times goods were sold during an accounting period which thereby states the productivity or the efficiency level of the company regarding the inventory which apparently is the biggest asset for the company. Days’ sales in inventory: It indicates the days taken up by the company to convert the stock items into actual sales. Current Ratio : It depicts the efficiency of the company to set off its liabilities with the assets within a fiscal year. 1. To compute: Current ratio, inventory turnover and days’ sales in inventory for 2017 as per: (a) LIFO numbers (b) FIFO numbers

Question

Want to see the full answer?

Answer 1

Question

Chapter 5, Problem 11E

To determine

Inventory: Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business.

First in first out: In case of First in, first out method, also known as FIFO method, the inventory which was bought first will also be the first one to be taken out.

Last in first out: In case of Last in, First out, also known as LIFO method, the inventory which was bought in the last will be taken out first.

Inventory turnover ratio: It depicts the fraction of inventory sold or used by the company within a fiscal year. It states a ratio which shows the number of times goods were sold during an accounting period which thereby states the productivity or the efficiency level of the company regarding the inventory which apparently is the biggest asset for the company.

Days’ sales in inventory: It indicates the days taken up by the company to convert the stock items into actual sales.

Current Ratio: It depicts the efficiency of the company to set off its liabilities with the assets within a fiscal year.

1.

To compute: Current ratio, inventory turnover and days’ sales in inventory for 2017 as per:
(a) LIFO numbers
(b) FIFO numbers

To determine

2.

To interpret: Results of part 1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Evergreen Systems purchased machinery for $92,000 on January 1, 2020. Additional costs included $4,500 in delivery charges and $8,000 for installation and setup. The machinery is expected to have a salvage value of $20,000 at the end of its 4-year useful life. What is the amount of accumulated depreciation on December 31, 2021, using the straight-line method? Help

What is the company's contribution margin ratio ?

Your firm purchases a business copier that costs $14,000 and requires $3,000 in maintenance for each year of its four-year life. After four years, the copier will be replaced. The copier falls into the MACRS three-year class life category. Use DDB depreciation. If the tax rate is 32 percent, what is the depreciation tax shield for this project in year 4?