Question 4.

The asset side of the 2013 balance sheet for Leggett & Platt is below. The company reported cost of sales of $2,998.8 million in 2013 and $2,959.4 million in 2012. Use this information to answer the requirements. LEGGETT & PLATT, INCORPORATED Consolidated Balance Sheets December 31 2013 2012 (in millions) Cash and cash equivalents $ 272.7 $ 359.1 Trade and other receivables, net of allowance of $15.2 and $19.2 467.4 446.2 Inventories Finished goods 270.5 275.7 Work in process 59.3 55.0 Raw materials and supplies 239.4 229.4 LIFO reserve (73.3) (71.1) Total inventories, net 495.9 489.0 Other current assets 45.7 44.8 Total current assets 1,281.7 1,339.1 Machinery and equipment 1,184.5 1,161.7 Buildings and other 612.2 603.2 Land 44.5 45.3 Total property, plant and equipment 1,841.2 1,810.2 Less accumulated depreciation 1,266.6 1,237.4 Net property, plant and equipment 574.6 572.8 Goodwill 926.8 991.5 Other intangibles, less accumulated amortization 203.4 206.3 Sundry 121.6 145.2 TOTAL ASSETS $3,108.1 $3,254.9

Required: a. Calculate common-sized inventories for both years and comment on any differences that you note. Given that the company is in the furniture manufacturing industry, does this ratio seem appropriate?

b. Compute inventory turnover for both years and interpret any change. At December 31, 2011, Total inventories, net were $441 million.

c. Leggett & Platt uses LIFO for at least some of its inventory method. What would the company have reported as inventory in 2013 and 2012 if the company had used the FIFO method? At December 31, 2011, the LIFO reserve was $(85.7) million.

d. Recalculate cost of goods sold (COGS) under the FIFO method.

e. Recompute the inventory turnover ratios for 2013 and 2012 under the FIFO method. What difference do you notice between the FIFO-based ratios and the LIFO-based ratios?