Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show all work. That's all information provided. I'm not sure where to find cash flow and pretax income P6-42. Analyzing Inventories with Quarterly Data

image text in transcribedPlease show all work.

That's all information provided. I'm not sure where to find cash flow and pretax income

P6-42. Analyzing Inventories with Quarterly Data and LIFO Liquidation The inventory footnote from The Dow Chemical Company's first quarter 2019 SEC report follows. The company also reports cost of goods sold for Q1 of 2019 of $10,707 million. Inventories, in millions Finished goods. Work in process Raw materials.. Supplies Total... Adjustment of inventories to a LIFO basis. Total inventories.. Mar. 31, 2019 $5,703 2,239 940 891 $9,773 (265) $9,508 Dec. 31, 2018 $5,640 2,214 941 880 $9,675 (415) $9,260 Required a. What inventory costing method does Dow Chemical use? As of Q1 of 2019, what is the effect on cumulative pretax income and cash flow of using this inventory costing method? (Assume a 30% average cumulative tax rate.) What is the effect on Q1 of 2019 pretax income and cash flow of using this inventory costing method, assuming a 21% tax rate? b. Compute inventory turnover and average inventory days outstanding for Q1 of 2019. (Hint: How do we adjust the ratio for the number of days in a quarter instead of a year?) Comment on the level of these two ratios. Is the level what we expected? c. Determine the FIFO values for inventories and cost of goods sold for Q1 of 2019. Recompute inven- tory turnover and DIO. Compare the ratios to those from part b. Which set of ratios would provide more useful analysis? d. Explain why a reduction in the LIFO reserve increased income in Ql of 2019. P6-42. Analyzing Inventories with Quarterly Data and LIFO Liquidation The inventory footnote from The Dow Chemical Company's first quarter 2019 SEC report follows. The company also reports cost of goods sold for Q1 of 2019 of $10,707 million. Inventories, in millions Finished goods. Work in process Raw materials.. Supplies Total... Adjustment of inventories to a LIFO basis. Total inventories.. Mar. 31, 2019 $5,703 2,239 940 891 $9,773 (265) $9,508 Dec. 31, 2018 $5,640 2,214 941 880 $9,675 (415) $9,260 Required a. What inventory costing method does Dow Chemical use? As of Q1 of 2019, what is the effect on cumulative pretax income and cash flow of using this inventory costing method? (Assume a 30% average cumulative tax rate.) What is the effect on Q1 of 2019 pretax income and cash flow of using this inventory costing method, assuming a 21% tax rate? b. Compute inventory turnover and average inventory days outstanding for Q1 of 2019. (Hint: How do we adjust the ratio for the number of days in a quarter instead of a year?) Comment on the level of these two ratios. Is the level what we expected? c. Determine the FIFO values for inventories and cost of goods sold for Q1 of 2019. Recompute inven- tory turnover and DIO. Compare the ratios to those from part b. Which set of ratios would provide more useful analysis? d. Explain why a reduction in the LIFO reserve increased income in Ql of 2019

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Systems Exam Questions And Explanations

Authors: Ph.D. Gleim, Irvin N., Ph.D. Hillison, William A., Grady M. Irwin

17th Edition

1581949278, 978-1581949278

More Books

Students also viewed these Accounting questions

Question

Distinguish between filtering and interpreting. (Objective 2)

Answered: 1 week ago