Current Ratio : Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows: I n v e n t o r y T u r n o v e r R a t i o = C o s t o f g o o d s s o l d A v e r a g e i n v e n t o r y Note: Average inventory is calculated with the help of following formula: A v e r a g e i n v e n t o r y = ( B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y ) 2 Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows: D a y s s a l e s i n i n v e n t o r y = 365 I n v e n t o r y T u r n o v e r R a t i o Requirement-1(a): To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

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Answer 1

Question

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

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On January 3, 2020, Salma Industries acquired equipment for $420,000. The estimated useful life of the equipment is 6 years or 100,000 machine hours, with a residual value of $30,000. What is the book value of the asset on December 31, 2021, if Salma Industries uses the straight-line method of depreciation? Need help

Answer 2

Question

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Expert Solution & Answer

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Answer 3

Question

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Expert Solution & Answer

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Answer 4

Question

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Answer 6

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

Answer 7

Chapter 6, Problem 11E

To determine

Concept Introduction:

Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

$C u r r e n t R a t i o = \frac{C u r r e n t a s s e t s}{C u r r e n t l i a b i l i t i e s}$

Inventory Turnover Ratio: Inventory Turnover Ratio measures the efficiency of the company in converting its inventory into sales. It is calculated by dividing the Cost of goods sold by Average inventory. The formula of the Inventory Turnover Ratio is as follows:

$I n v e n t o r y T u r n o v e r R a t i o = \frac{C o s t o f g o o d s s o l d}{A v e r a g e i n v e n t o r y}$

Note: Average inventory is calculated with the help of following formula:

$A v e r a g e i n v e n t o r y = \frac{(B e g i n n i n g i n v e n t o r y + E n d i n g i n v e n t o r y)}{2}$

Day’s sales in inventory: Days sales in inventory represent the number of days the inventory waits for the sale. It is calculated by dividing the 365 days by Inventory Turnover Ratio. The formula of the Days sales in inventory is as follows:

$D a y s s a l e s i n i n v e n t o r y = \frac{365}{I n v e n t o r y T u r n o v e r R a t i o}$

Requirement-1(a):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using LIFO numbers:

Answer 8

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

Answer 9

To determine

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

Answer 10

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Answer 11

To determine

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 6 - Prob. 1DQ Ch. 6 - 2. Where is the amount of merchandise inventory...Ch. 6 - Prob. 3DQ Ch. 6 - Prob. 4DQ Ch. 6 - What does the full disclosure principle prescribe...Ch. 6 - Prob. 6DQ Ch. 6 - Prob. 7DQ Ch. 6 - Prob. 8DQ Ch. 6 - Prob. 9DQ Ch. 6 - What is the meaning of market as it is used in...

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Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

Want to see the full answer?

Chapter 6 Solutions

Concept explainers

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Requirement-1(b): To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

Requirement-2: To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods:

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Chapter 6 Solutions

Requirement-1(b):

To determine: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO numbers:

Requirement-2:

To Interpret: The Current Ratio, Inventory turnover ratio and days sales in inventory for 2017 using FIFO and LIFO methods: