Concept explainers
(a)
Inventory turnover ratio: This is a financial measure that is used to evaluate as to how many times a company sells or uses its inventory during an accounting period. It is calculated by using the following formula:
To Define: The finished goods, work in process, and raw materials.
(b)
To Explain: The reason for using FIFO method for non-domestic inventories.
(c)
To Calculate: The inventory turnover ratio and days in inventory of Company A for 2016 and 2017.
(d)
LIFO Reserve: It is a contra inventory account that shows the difference between the inventory cost under FIFO and inventory cost under LIFO. This account is recorded when a company uses FIFO method for its
To Calculate: The percentage of total inventory of LIFO reserve.
(e)
Formula:
To Compute: The current ratio of Company A for 2017.
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Chapter 6 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
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