Please help me fast The following information is taken from Satin financial stat

Question

Please help me fast The following information is taken from Satin financial statemen The following information s taken from Satin financial statements (amounts In thousands): inventory had been used, inventory would have been approximately $26.9 million and $25.1 million higher than reported at 12/31)2010 and 12/31/2009, respectively. Required: A) Calculate what inventory would have been at 12/31/2010 and 12131/2009 had the FIFO inventory method been used. B) What would cost of goods sold for the year ended 12/31/2010 have been if the FIFO inventory method been used? Show your computations. C) Compute the Inventory turnover ratio for 2010 using a LIFO cost-flow assumption, D) Compute the inventory turnover ratio for 2010 using a FIFO cost-flow assumption. E) Explain why the costs assigned to inventory under LIFO at the end of 2009 and 2010 are different than they are underFlFO.

Explanation / Answer

Dec. 31, 2010 Dec. 31, 2009 Inventory at LIFO $2,19,686 $2,41,154 Cost of goods sold at LIFO $7,54,661 $6,75,138 stockholder's equity $2,42,503 $2,42,712 Net Income $31,185 $64,150 Tax rate 37% 37% a) Calculate what inventory would have been at Dec. 31, 2010 and Dec. 31, 209, had the FIFO inventory method been used. Dec. 31, 2010 Dec. 31, 2009 Inventory at LIFO $2,19,686 $2,41,154 Add: FIFO reserve $26,900 $25,100 Inventory at FIFO $2,46,586 $2,66,254 b) What would cost of goods sold for the year ended Dec. 31, 2010 have been if the FIFO inventory method been used. LIFO FIFO Beginning inventory $2,41,154 $2,66,254 Add: Purchases $7,33,193 $7,33,193 $9,74,347 $9,99,447 Less: COGS $7,54,661 $7,52,861 Ending Inventory $2,19,686 $2,46,586 COGS for 2010 $7,52,861 c) Compute the inventory turnover ratio for 2010 using LIFO cost flow assumption. Beginning inventory $2,41,154 Ending Inventory $2,19,686 Average Inventory $2,30,420 Cost of goods sold $7,54,661 Inventory turnover ratio 3.28 d) Compute the inventory turnover ratio for 2010 using FIFO cost flow assumption. Beginning inventory $2,66,254 Ending Inventory $2,46,586 Average Inventory $2,56,420 Cost of goods sold $7,52,861 Inventory turnover ratio 2.94 e) Explain why the costs assigned to inventory unde LIFO at the end of 2009 and 2010 are different than they are under FIFO. The valuation of inventory is made on the cost incurred for purchase of that inventory. Since the cost of inventory changes with time and as per market conditions, hence the value of inventory is also different with the method of inventory valuation used.                                                                      Under LIFO method it is assumed that the units purchased recently are consumed earlier. Therefore the increase in the price is transferred to cost of goods sold.                                                      Hence, we have seen higher COGS under LIFO method than the FIFO method.

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