The following comparative information is available for Public Company for 2010.
|
LIFO |
FIFO |
|
|
Sales |
$83,000 |
83,000 |
|
Cost of goods sold |
38,000 |
29,000 |
|
Operating expenses |
27,000 |
27,000 |
|
Depreciation |
10,000 |
10,000 |
|
Cash paid for inventory purchases |
34,000 |
34,000 |
Instructions
(a) Determine net income under each approach. Assume a 30% tax rate.
(b) Determine net cash provided by operating activities under each approach. Assume that all sales were on a cash basis and that Income taxes and operating expenses, other than depreciation, were on a cash basis.
(c) Calculate the quality of earnings ratio under each approach and explain your findings.