Answer:
Cooper Company
1. FIFO:
Current ratio
= 3.15
Inventory turnover ratio
= 1.34
Rate of return on operating assets
= 12%
2. LIFO:
Current ratio
= 2.85
Inventory turnover ratio
= 1.73
Rate of return on operating assets
= 12.8%
Explanation:
a) Data and Calculations:
Merchandise inventory, January 1 $1,430,000
Current assets 3,603,600
Total assets (operating) 5,720,000
Cost of goods sold (FIFO) 2,230,800
Merchandise inventory, December 31 (LIFO) 1,544,400
Merchandise inventory, December 31 (FIFO) 1,887,600
Current liabilities 1,144,000
Net sales 3,832,400
Operating expenses 915,200
FIFO
Merchandise inventory, December 31 (FIFO) $1,887,600
Cost of goods sold (FIFO) 2,230,800
Goods available for sale $4,118,400
Merchandise inventory, January 1 1,430,000
Purchases $2,688,400
LIFO:
Goods available for sale $4,118,400
Merchandise inventory, December 31 (LIFO) 1,544,400
Cost of goods sold (LIFO) $2,574,000
Income Statements FIFO LIFO
Net sales $3,832,400 $3,832,400
Cost of goods sold (FIFO) 2,230,800 2,574,000
Gross profit $1,601,600 $1,258,400
Operating expenses 915,200 915,200
Net income $686,400 $343,200
Merchandise inventory, December 31 (LIFO) 1,544,400
Merchandise inventory, December 31 (FIFO) 1,887,600
Difference between FIFO and LIFO = 343,200
FIFO Difference LIFO
Current assets 3,603,600 343,200 3,260,400
Total assets (operating) 5,720,000 343,200 5,376,800
Cost of goods sold (FIFO) 2,230,800 2,574,000
Merchandise inventory, January 1 1,430,000 1,430,000
Merchandise inventory, December 31 1,887,600 1,544,400
Current liabilities 1,144,000 1,144,000
Average inventory 1,658,800 1,487,200
FIFO:
Current ratio = current assets/current liabilities
= $3,603,600/$1,144,000 = 3.15
Inventory turnover ratio = Cost of goods sold/Average Inventory
= $2,230,800/$1,658,800
= 1.34
Rate of return on operating assets = Net income/Total assets * 100
= $686,400/$5,720,000 * 100
= 12%
LIFO:
Current ratio = $3,260,400/$1,144,000
= 2.85
Inventory turnover ratio = $2,574,000/$1,487,200
= 1.73
Rate of return on operating assets = $686,400/$5,376,800 * 100
= 12.8%
