Paper Company is considering switching from the FIFO method to the LIFO method of accounting for its inventory before it closes its books for the year. The January 1 merchandise inventory was \(\$ 864,000\). Following are data compiled from the adjusted trial balance at the end of the year:

If the switch to LIFO takes place, the December 31 merchandise inventory would be \(\$ 900,000\).

a. Compute the current ratio, inventory turnover ratio, and rate of return on operating assets assuming the company continues using FIFO.

b. Repeat a assuming the company adjusts its accounts to the LIFO inventory method.

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Merchandise inventory, December 31 (FIFO). $1,008,000 Current liabilities.. Net sales Operating expenses Current assets Total assets (operating) Cost of goods sold. 720,000 2,520,000 774,000 1,890,000 2,880,000 1,458,000