Pronto, Inc. is a major producer of printing equipment. Pronto uses a LIFO cost-flow assumption for inventories. The company's tax rate is 35%. Below is selected financial data for the company.

a. The excess of FIFO over LIFO inventories was $25 million on December 31, 2013, $28.5 million on December 31, 2012 and $22 million on December 31, 2011. Compute the cost of goods sold for Pronto, Inc. for years 2013 and 2012 assuming that it had used a FIFO assumption.
b. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a LIFO cost-flow assumption.
c. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a FIFO cost-flow assumption.
d. Compute the rate of return on assets for years 2013 and 2012 based on the reported amounts. Disaggregate ROA into profit margin and asset turnover components.
e. Compute the rate of return on assets for years 2013 and 2012 assuming that Pronto, Inc. had used the FIFO method of accounting for inventories. Disaggregate ROA into profit margin and asset turnover components.

Question

Pronto, Inc. is a major producer of printing equipment. Pronto uses a LIFO cost-flow assumption for inventories. The company's tax rate is 35%. Below is selected financial data for the company.
  
a. The excess of FIFO over LIFO inventories was $25 million on December 31, 2013, $28.5 million on December 31, 2012 and $22 million on December 31, 2011. Compute the cost of goods sold for Pronto, Inc. for years 2013 and 2012 assuming that it had used a FIFO assumption.
b. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a LIFO cost-flow assumption.
c. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a FIFO cost-flow assumption.
d. Compute the rate of return on assets for years 2013 and 2012 based on the reported amounts. Disaggregate ROA into profit margin and asset turnover components.
e. Compute the rate of return on assets for years 2013 and 2012 assuming that Pronto, Inc. had used the FIFO method of accounting for inventories. Disaggregate ROA into profit margin and asset turnover components.

Quizplus · Accepted Answer

The Answer of Pronto, Inc. is a major producer of printing equipment. Pronto uses a LIFO cost-flow assumption for inventories. The company's tax rate is 35%. Below is selected financial data for the company.
  
a. The excess of FIFO over LIFO inventories was $25 million on December 31, 2013, $28.5 million on December 31, 2012 and $22 million on December 31, 2011. Compute the cost of goods sold for Pronto, Inc. for years 2013 and 2012 assuming that it had used a FIFO assumption.
b. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a LIFO cost-flow assumption.
c. Compute the inventory turnover ratio for Pronto, Inc. for years 2013 and 2012 using a FIFO cost-flow assumption.
d. Compute the rate of return on assets for years 2013 and 2012 based on the reported amounts. Disaggregate ROA into profit margin and asset turnover components.
e. Compute the rate of return on assets for years 2013 and 2012 assuming that Pronto, Inc. had used the FIFO method of accounting for inventories. Disaggregate ROA into profit margin and asset turnover components.