Suppose this information (in millions) is available for the Automotive and Other

Question

Suppose this information (in millions) is available for the Automotive and Other Operations Divisions of General Motors Corporation for a recent year. General Motors Corporation uses the LIFO inventory method.

163,412

Calculate the inventory turnover and days in inventory. (Round answers to 1 decimal place, e.g. 5.1.)

Calculate the current ratio based on inventory as reported using LIFO. (Round answer to 2 decimal places, e.g. 5.12.)

Calculate the current ratio after adjusting for the LIFO reserve. (Round answer to 2 decimal places, e.g. 5.12.)

Beginning inventory $15,279 Ending inventory 14,409 LIFO reserve 1,505 Current assets 64,524 Current liabilities 68,379 Cost of goods sold 154,105 Sales revenue

163,412

Explanation / Answer

Inventory Turnover Ratio = Cost of goods sold/average inventory = 154,105/14844 =10.3816357=10.38
Average Inventory = ($15,279+14,409) / 2 = 14844

Days in inventory = 365/Inventory turnover ratio = 365/10.38 = 35.1637765=35.16

B) Current Ratio = Current assets/Current liabilities = 64,524/

=0.943623042:1
=0.94:1
C) the current ratio after adjusting for the LIFO reserve add the LIFO reserve to current assets

Current Assets = 64,524+1,505 = 61558
Current Liabilities =68,379

Current ratio = Current assets/Current liabilities = 66029/68,379 = 0.965632723:1 =0.97:1

68,379

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.