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

تمرين 51

FIFO versus LIFO Comparisons
JC Penney Company uses LIFO in applying the lower-of-cost-or-market. Recent financial statements were used to compile the following information (dollar figures in millions):

Instructions
a. Using the information provided, compute the following measures based on 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 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, 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 JC Penney to collect its accounts receivable is so low. (See Chapter 7 for a discussion of the accounts receivable turnover.)