Inverness Steel Corporation is a producer of flat-rolled carbon, stainless and electrical steels, and tubular products. The company’s income statement for the 2021 fiscal year reported the following information ($ in millions): 

Sales.......................................$6,255 

Cost of goods sold..............5,190 

The company’s balance sheets for 2021 and 2020 included the following information ($ in millions): 

The statement of cash flows reported bad debt expense for 2021 of $8 million. The summary of significant accounting policies included the following notes ($ in millions): 

Accounts Receivable (in part) 

The allowance for uncollectible accounts was $10 and $7 at December 31, 2021 and 2020, respectively. All sales are on credit. 

Inventories 

Inventories are valued at the lower of cost or market. The cost of the majority of inventories is measured using the last-in, first-out (LIFO) method. Other inventories are measured principally at average cost and consist mostly of foreign inventories and certain raw materials. If the entire inventory had been valued on an average cost basis, inventory would have been higher by $480 and $350 at the end of 2021 and 2020, respectively. During 2021, 2020, and 2019, liquidation of LIFO layers generated income of $6, $7, and $25, respectively. 

Required: 

Using the information provided: 

1. Determine the amount of accounts receivable Inverness wrote off during 2021. 

2. Calculate the amount of cash collected from customers during 2021. 

3. Calculate what cost of goods sold would have been for 2021 if the company had used average cost to value its entire inventory. 

4. Calculate the following ratios for 2021: 

a. Receivables turnover ratio 

b. Inventory turnover ratio 

c. Gross profit ratio 

5. Explain briefly what caused the income generated by the liquidation of LIFO layers. Assuming an income tax rate of 25%, what was the effect of the liquidation of LIFO layers on cost of goods sold in 2021?

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2021 2020 Current assets: Accounts receivable, net $703 $583 Inventories 880 808