Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 47

FIFO versus LIFO Comparisons
Walmart uses LIFO to account for its inventories. Recent financial statements were used to compile the following information (dollar figures are in millions):

Instructions
a. Using the information provided, compute the following measures based upon the LIFO method:
1. Inventory turnover.
2. Current ratio (see Chapter 5 for a discussion of this ratio).
3. Gross profit rate (see Chapter 6 for a discussion of this statistic).
b. Assuming 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, rising or falling?)
c. How would you expect these ratios to differ (i.e., what direction) had the company used FIFO instead of LIFO?
d. Explain why the average number of days required by Walmart to collect its accounts receivable is so low. (See Chapter 7 for a discussion of the accounts receivable turnover rate.)