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Exercise 5-18 (Algo) Comparing LIFO numbers to FIFO numbers; ratio analysis LO A3 Exercise 5-18 (Algo) Comparing LIFO numbers to FIFO numbers; ratio analysis LO
Exercise 5-18 (Algo) Comparing LIFO numbers to FIFO numbers; ratio analysis LO A3
Exercise 5-18 (Algo) Comparing LIFO numbers to FIFO numbers; ratio analysis LO A3 Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes. Year 1 $ 100 670 125 LIFO inventory LIFO cost of goods sold FIFO inventory FIFO cost of goods sold Current assets (using LIFO) Current assets (using FIFO) Current liabilities Year 2 $ 150 730 220 685 210 280 190 180 205 170 1. Compute its current ratio, inventory turnover, and days' sales in inventory for year 2 using (a) LIFO numbers and (b) FIFO numbers. (a) Compute its current ratio, inventory turnover, and days' sales in inventory for year 2 using LIFO numbers. Numerator / Denominator Ratio Current ratio $ 210.0 / $ 190.0 = 1.1 to 1 $ 730.0 / $ 125.0 = 5.8 times Inventory turnover Days' sales in inventory X $ 730.0 x 365 = 0.0 (b) Compute its current ratio, inventory turnover, and days' sales in inventory for year 2 using FIFO numbers. Numerator / Denominator = Ratio Current ratio $ 280.0 1 $ 190.0 1.5 to 1 Inventory turnover $ 685.0 / $ 172.5 4.0 times Days' sales in inventory $ 685.0 x 365 = 0.0 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deductedStep by Step Solution
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