The following are the income statement, the assets section of the balance sheet, and inventory disclosures from Carl's Toys, a toy manufacturer, for 2019.
Inventories
Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower-of-cost-or-net realizable value . Cost is determined by the first-in, first-out method.
Required:
a. Compute the inventory turnover for both 2019 and 2018. The 2017 ending inventories balance was $856 (thousand). Interpret and explain the change in inventory turnover as a positive or a negative for the company.
b. Compute the days' sales in inventory for both 2019 and 2018. Discuss what this measures and the importance of this measurement in analyzing company performance.
c. What inventory costing method does Carl's Toys use? Is there any adjustment required to Carl's Toys' balance sheet amount of inventories for a LIFO reserve? Describe why such an adjustment is needed or not needed for Foster Toys.

Question

The following are the income statement, the assets section of the balance sheet, and inventory disclosures from Carl's Toys, a toy manufacturer, for 2019. 
   Inventories
Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower-of-cost-or-net realizable value . Cost is determined by the first-in, first-out method.
Required:
a. Compute the inventory turnover for both 2019 and 2018. The 2017 ending inventories balance was $856 (thousand). Interpret and explain the change in inventory turnover as a positive or a negative for the company.
b. Compute the days' sales in inventory for both 2019 and 2018. Discuss what this measures and the importance of this measurement in analyzing company performance.
c. What inventory costing method does Carl's Toys use? Is there any adjustment required to Carl's Toys' balance sheet amount of inventories for a LIFO reserve? Describe why such an adjustment is needed or not needed for Foster Toys.

Quizplus · Accepted Answer

The Answer of The following are the income statement, the assets section of the balance sheet, and inventory disclosures from Carl's Toys, a toy manufacturer, for 2019. 
   Inventories
Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower-of-cost-or-net realizable value . Cost is determined by the first-in, first-out method.
Required:
a. Compute the inventory turnover for both 2019 and 2018. The 2017 ending inventories balance was $856 (thousand). Interpret and explain the change in inventory turnover as a positive or a negative for the company.
b. Compute the days' sales in inventory for both 2019 and 2018. Discuss what this measures and the importance of this measurement in analyzing company performance.
c. What inventory costing method does Carl's Toys use? Is there any adjustment required to Carl's Toys' balance sheet amount of inventories for a LIFO reserve? Describe why such an adjustment is needed or not needed for Foster Toys.

The Following Are the Income Statement, the Assets Section of the Balance