Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
Exercise 5.18 LO 7,8 LIFO versus FIFO-impact on ROI Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and
Exercise 5.18 LO 7,8 LIFO versus FIFO-impact on ROI Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $1,500,000 and average assets of $10,000,000. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $300,000 more than under FIFO, and its average assets would have been $300,000 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and LIFO). b. Suppose that two years later costs and prices were falling. Under FIFO, net! income and average assets were $1,800,000 and $12,000,000, respectively. If LIFO had been used through the years, inventory values would have been $200.000 less than under FIFO, and current year cost of goods sold would have been $100,000 less than under FIFO. Calculate the firm's ROI under flow assumption (FIFO and LIFO)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started