problem 8.8b

pROBLEM 8.8B FIFO CompansonS LIFO in applying the Recent financial state- were the following information (dollar figures in millions): inventory ttw year) . Current assets (at year-end) Current (at year-end) . Net sales Cost ot sold . Gross . Average required to collect Outstanding receivaNeS s 3,305 6.648 3.492 19.903 12,078 7,825 4.9 days a. b. C. d. Using the information provided. compute the following measures based upon the LIFO I. Inventory turnover. 2. Current ratio (see Chapter for a discussion Of this ratio). 3. Gross (see Chapter 6 for a discussion Of this statistic). Assuming the cost Of goods sold would be lower under FIFO. What circumstances must the company have encountered to cause this situation? (Were replacement Costs. on average. ris- ing falling?) How would you these ratios to differ (i.e What direction) had the company used FIFO insteui of LIFO? Explain why the average numtxr Of days required by JC Penney to collect its accounts receiv- able is so low. (See Chapter 7 for a discussion of the accounts receivable turnover.