Let’s say that two companies, identical in every way except that one used FIFO and one used average cost, went into a bank on the same day to get a loan to deal with the rising cost of acquiring inventory. Despite the fact that they both engaged in the same transactions at the same dollar values, one company reported higher net income and higher total assets on the financial statements. Which one was it? If the banker made the decision based on the company that would have better cash flow associated with the inventory costing method choice, which company would have received the loan?
Answer to relevant QuestionsDescribe some business and economic conditions that might make the lower of cost or net realizable value more likely to be used. Inland Lumber began the year with inventory of $52,200 and made purchases of $316,700 during the year. Sales for the year are $503,800, and Inland Lumber’s gross profit percentage is 42% of sales. Compute Inland Lumber’s ...Match the terms with the definitions. Refer to the data for E6-1 A. However, instead of the FIFO method, assume Austin’s Jewelers uses the average cost method. In E6-1A Requirements 1. Prepare a perpetual inventory record for the watches on the average cost ...Pete’s Plants has the following information as of October 31, 2014: Requirements 1. Compute the rate of inventory turnover for Pete's Plants for the year ended October 31, 2014. Round the result to two decimal places. 2. ...
Post your question