Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 5.22MCE
Cost of Goods Sold, FIFO, and LIFO
Kramer began operations early in 2016 and made the following purchases:
Kramer used the FIFO method to value its inventory and reported cost of goods sold expense for the year of $4,000.
Required
Determine the cost of goods sold expense assuming Kramer had used the LIFO method instead of the FIFO method.
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(Inventoriable Goods and Costs) In your audit of Jose Oliva Company, you find that a physical inventory on December 31, 2017, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000.1. Merchandise of $61,000 which is held by Oliva on consignment. The consignor is the Max Suzuki Company.2. Merchandise costing $38,000 which was shipped by Oliva f.o.b. destination to a customer on December 31, 2017. The customer was expected to receive the merchandise on January 6, 2018.3. Merchandise costing $46,000 which was shipped by Oliva f.o.b. shipping point to a customer on December 29, 2017. The customer was scheduled to receive the merchandise on January 2, 2018.4. Merchandise costing $83,000 shipped by a vendor f.o.b. destination on December 30, 2017, and received by Oliva on January 4, 2018.5. Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Oliva on…
Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods
sold using FIFO for comparison purposes.
Year 1
Year 2
$ 160
LIFO inventory
LIFO Cost of goods sold
FIFO inventory
FIFO COst of goods sold
Current assets (using LIFO)
Current assets (using FIFO)
$ 110
740
680
240
110
660
645
220
180
300
180
Current liabilities
200
170
1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIFO numbers and (b) FIFO numbers.
(a) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using LIFO
numbers.
IDenominator
Numerator
Ratio
Current ratio
1.2 to 1
220.0
Inventory turnover
$
740.0
0
Days' sales in inventory
160.0
0
(b) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using FIFO
numbers.
Numerator
Denominator
Ratio
Current ratio
$
300.0
0
Inventory turnover
660.0
$
0
Days' sales in inventory
240.0
$
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Chapter 5 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 5 - Merchandise Accounting Merchandise Inventory Raw...Ch. 5 - Inventory Valuation Specific identification method...Ch. 5 - Inventoriable Costs During the first month of...Ch. 5 - Perpetual and Periodic Inventory Systems Following...Ch. 5 - Missing Amounts in Cost of Goods Sold Model For...Ch. 5 - Purchase Discounts For each of the following...Ch. 5 - Working Backward: Gross Profit Ratio Acmes gross...Ch. 5 - Inventory Costing Methods VanderMeer Inc. reported...Ch. 5 - Cost of Goods Sold, FIFO, and LIFO Kramer began...Ch. 5 - Comparison of Inventory Costing Methods—Periodic...
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