Chapter 11 SB questions

Sales for Year 2 were $2,400,000. Accounts receivable was $200,000 at the end of Year 1 and $300,000 at the end of Year 2. The accounts receivable turnover for Year 2 (rounded to one decimal) was:

$2,400,000 / (($200,000 + $300,000) / 2) = 9.6 times

The LIFO reserve is the difference between the inventory valuation as reported under:

LIFO and the amount that would have been reported under FIFO.

A company desiring to increase its total asset turnover could do so by using:

an accelerated depreciation method and the LIFO cost flow assumption.

Cost of goods sold was $400,000 and $500,000 in Year 1 and Year 2, respectively. Sales for Year 2 were $1,000,000. Inventory was $60,000 at the end of Year 1 and $40,000 at the end of Year 2. The inventory turnover for Year 2 (rounded to one decimal) was:

$500,000 / (($60,000 + $40,000) / 2) = 10.0 times

Cost of goods sold was $200,000 and $300,000 in Year 1 and Year 2, respectively. Sales for Year 2 were $500,000. Inventory was $15,000 at the end of Year 1 and $25,000 at the end of Year 2. The inventory turnover for Year 2 (rounded to one decimal) was:

300,000 / (($15,000 + $25,000) / 2) = 15.0 times

The ratios used to facilitate the interpretation of an entity's financial position and results of operations can be grouped into four (4) categories:

liquidity, activity, profitability, and debt

The LIFO reserve:

may be disclosed in the notes to the financial statements.

The ratios used to facilitate the interpretation of an entity's financial position and results of operations can be grouped into four categories:

profitability debt (or financial leverage) liquidity activity

To calculate the accounts receivable turnover, you would divide:

sales by the average accounts receivable.

The use of an accelerated depreciation method and the LIFO inventory cost flow assumption will usually (increase/decrease) a company's total asset turnover relative to using the straight-line method and FIFO.

Increase

The difference between the inventory valuation as reported under LIFO and the amount that would have been reported under FIFO is called the:

LIFO reserve