Cruz Company uses LIFO for inventory costing andreports the following financial
ID: 2502172 • Letter: C
Question
Cruz Company uses LIFO for inventory costing andreports the following financial data. It also recomputed inventoryand cost of goods sold using FIFO for comparison purposes.
2008
2007
LIFO Inventory
$
120
$
84
LIFO Cost of goods sold
700
763
FIFO Inventory
260
457
FIFO Cost of goods sold
600
645
Current assets (using LIFO)
200
160
Current liabilities
180
144
Required:
Compute its current ratio, inventory turnover,and days' sales in inventory for 2008 using (a) LIFOnumbers and (b) FIFO numbers. (Round your answerto 1 decimal place.)
Current ratio
Inventory turnover (times)
Days' sales in inventory (days)
LIFO
FIFO
Cruz Company uses LIFO for inventory costing andreports the following financial data. It also recomputed inventoryand cost of goods sold using FIFO for comparison purposes.
2008
2007
LIFO Inventory
$
120
$
84
LIFO Cost of goods sold
700
763
FIFO Inventory
260
457
FIFO Cost of goods sold
600
645
Current assets (using LIFO)
200
160
Current liabilities
180
144
Required:
Compute its current ratio, inventory turnover,and days' sales in inventory for 2008 using (a) LIFOnumbers and (b) FIFO numbers. (Round your answerto 1 decimal place.)
Current ratio
Inventory turnover (times)
Days' sales in inventory (days)
LIFO
FIFO
Explanation / Answer
1.11
700/102
6.86 or6.90times
52.8 or 53days
$340
1.8
600/ 358.5
1.68 or1.70times
365 / 1.70
(A.)LIFO CurrentRatio = Current Assets / Currentliabilities = 200 / 180 =1.11
Inventoryratio = Cost of goods sold / Averageinventory = 700 / {(84 + 120)/2} =700/102
=6.86 or6.90times
Day'ssales in Inventory = 365 / Inventory turnoverratio = 365 / 6.9 =52.8 or 53days
(B.)FIFO CurrentRatio = Current Assets / Currentliabilities Current Assets = 200 - 120(lifo inventory) + 260 (fifoinventory) =$340
Current Ratio = $340/ 180 =1.8
Inventoryratio = Cost of goods sold / Averageinventory = 600 / {(457+260) / 2} =600/ 358.5
=1.68 or1.70times
Day'ssales in Inventory = 365 / Inventory turnoverratio =365 / 1.70
= 214.7 or 215daysRelated Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.