This information is available for the Automotive and Other Operations Divisions

Question

This information is available for the Automotive and Other Operations Divisions of MJ Motors Corporation for 2006. MJ Motors uses the LIFO inventory method.

(in millions) 2006
Beginning inventory $14,610
Ending inventory 14,398
LIFO reserve 2,061
Current assets 75,872
Current liabilities 68,823
Cost of goods sold 165,582
Sales 175,266


(a) Calculate the inventory turnover ratio and days in inventory. (Round turnover ratio to 3 decimal places, e.g. 15.250 and days in inventory to 1 decimal place, e.g. 20.5.)



Inventory turnover ratio times
Days in inventory days


(b) Calculate the current ratio based on inventory as reported using LIFO. (Round answer to 2 decimal places, e.g. 0.55.)

: 1


(c) Calculate the current ratio after adjusting for the LIFO reserve. (Round answer to 2 decimal places, e.g. 0.55.)

: 1

Explanation / Answer

a. Inventory turnover=Cost of Goods Sold/average inventory=165,228/((14924+14679)/2)=165,228/14801.5=11.1629 365days/11.1629=32.697=32.7 days one time turnover b.Current assets/Current liabilities=72,124/70,138=1.03 c. (Current assets-LIFO reserve)/Current liabilities=(72124-2328)/70138=69796/70138=.99

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.