Cooper Company currently uses the FIFO method to account for its inventory but is considering a switch to LIFO before the books are closed for the year. Selected data for the year are:
|
Merchandise inventory, January 1 |
$1,430,000 |
|
Current assets |
36,03,600 |
|
Total assets (operating) |
57,20,000 |
|
Cost of goods sold (FIFO) |
22,30,800 |
|
Merchandise inventory, December 31 (LIFO) |
15,44,400 |
|
Merchandise inventory, December 31 (FIFO) |
18,87,600 |
|
Current liabilities |
11,44,000 |
|
Net sales |
38,32,400 |
|
Operating expenses |
9,15,200 |
a. Compute the current ratio, inventory turnover ratio, and rate of return on operating assets assuming the company continues using FIFO.
b. Repeat part (a) assuming the company adjusts its accounts to the LIFO inventory method.