Question - The following information is taken from Satin financial statements (amounts in thousands):
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12/31/2010
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12/31/2009
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Inventory at LIFO
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$219,686
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$241,154
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Cost of goods sold at LIFO
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754,661
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675,138
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Stockholders' Equity
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242,503
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242,712
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Net Income
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31,185
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64,150
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Tax rate
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37%
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37%
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Inventory Footnote: If the first-in, first-out method of accounting for inventory had been used, inventory would have been approximately $26.9 million and $25.1 million higher than reported at 12/31/2010 and 12/31/2009, respectively.
Required:
A) Calculate what inventory would have been at 12/31/2010 and 12/31/2009 had the FIFO inventory method been used.
B) What would cost of goods sold for the year ended 12/31/2010 have been if the FIFO inventory method been used? Show your computations.
C) Compute the inventory turnover ratio for 2010 using a LIFO cost-flow assumption.
D) Compute the inventory turnover ratio for 2010 using a FIFO cost-flow assumption.
E) Explain why the costs assigned to inventory under LIFO at the end of 2009 and 2010 are different than they are under FIFO.