Question
Exercise 5-18 (Static) Comparing LIFO numbers to FIFO numbers; ratio analysis LO A3 Cruz Company uses LIFO for inventory costing and reports the following
Exercise 5-18 (Static) 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 2 LIFO inventory $ 160 Year 1 $ 110 LIFO cost of goods sold 740 680 FIFO inventory 240 110 FIFO cost of goods sold 660 645 Current assets (using LIFO) 220 180 Current assets (using FIFO) Current liabilities 300 200 180 170 1. Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using (a) LIFO numbers and (b) FIFO numbers. Answer is complete but not entirely correct. (a) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using LIFO numbers. Numerator / Denominator Ratio Current ratio $ 220.0/$ 200.0 II 1.1 to 1 Inventory turnover $ 740.0 / $ 135.0 = 5.5 times x 365 Days' sales in inventory $ 135.0 /$ 740.0 66.6 days (b) Compute its current ratio, inventory turnover, and days' sales in inventory for Year 2 using FIFO numbers. Current ratio $ Numerator 300.0 Denominator Ratio /$ 200.0 = 1.5 to 1 Inventory turnover $ 660.0 / $ 175.0 = 3.8 times x 365 Days' sales in inventory $ 175.0 X/ $ 660.0 96.8 days =
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