Walmart uses LIFO to account for its inventories. Recent financial statements were used to compile the following
Question:
Walmart uses LIFO to account for its inventories. Recent financial statements were used to compile the following information (dollar figures are in millions) .
Instructions:
a. Using the information provided, compute the following measures based upon the LIFO method.
1. Inventory turnover.
2. Current ratio (see Chapter 5 for a discussion of this ratio).
3. Gross profit rate (see Chapter 6 for a discussion of this statistic).
b. Assuming cost of goods sold would be lower under FIFO, what circumstances must the company have encountered to cause this situation? (Were replacement costs, on average, rising or falling?)
c. How would you expect these ratios to differ (i.e., what direction) had the company used FIFO instead of LIFO?
Step by Step Answer:
Financial And Managerial Accounting The Basis For Business Decisions
ISBN: 9781260247930
19th Edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello