Laura Badora Company has been using LIFO inventory. The company is required to disclose the replace- ment cost of its inventory and the replacement cost of its cost of goods sold on its annual statements.
Selected data for the year ended 2007 are as follows:
Ending accounts receivable, less
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allowance for doubtful accounts of $25,000
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$480,000
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Ending inventory, LIFO (estimated replacement $900,000)
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570,000
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Net sales
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3,650,000
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Cost of goods sold (estimated replacement cost $3,150,000)
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2,850,000
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Required:
a. Compute the days' sales in receivables.
b. Compute the days' sales in inventory, using the cost figure.
c. Compute the days' sales in inventory, using the replacement cost for the inventory and the cost of goods sold.
d. Should replacement cost of inventory and cost of goods sold be used, when possible, when computing days' sales in inventory? Discuss.