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Inventory Accounting Analysis

Droog Co. is a retailer that sells a single product. Throughout the year, it made various purchases totaling 1,800 units at different prices per unit. Total purchases for the year were $23,200. Ending inventory was 800 units. The company's other assets were $75,000 including $50,000 in current assets. Current liabilities were $25,000 and long-term liabilities were $10,000. The company needs to calculate its net income and various financial ratios under FIFO, LIFO, and average cost inventory methods assuming a $25 sales price per unit.

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708 views3 pages

Inventory Accounting Analysis

Droog Co. is a retailer that sells a single product. Throughout the year, it made various purchases totaling 1,800 units at different prices per unit. Total purchases for the year were $23,200. Ending inventory was 800 units. The company's other assets were $75,000 including $50,000 in current assets. Current liabilities were $25,000 and long-term liabilities were $10,000. The company needs to calculate its net income and various financial ratios under FIFO, LIFO, and average cost inventory methods assuming a $25 sales price per unit.

Uploaded by

Widia Irma Yunita
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Droog Co. is a retailer dealing in a single product.

Beginning inventory at January 1 of this year iszero, operating expenses for this same

Units Per unit Cost


January 100 10 1000
March 300 11 3300
June 600 12 7200
October 300 14 4200
December 500 15 7500

Total 1800 23200

Ending inventory at December 31 is 800 units. End-of-year assets, excluding inventories, amount to $75,000, of which $50,000 of the $7
Required
a.Determine net income for this year under each of the following inventory methods. Assume a sales price of$25 per unit an
1 FIFO
2 LIFO
3 Average Cost

b.Compute the following ratios under each of the inventory methods of FIFO, LIFO, and average cost
1 Current Ratio
2 Debt to equity ratio
3 Inventory Turnover
4 Return on total assets
5 Gross margin as a percent of sales
o, operating expenses for this same year are $5,000, and there are 2,000 common shares out-standing. The following purchases are made this year:

$75,000, of which $50,000 of the $75,000 are current. Current liabilities amount to $25,000, and long-term liabilities equal $10,000

e a sales price of$25 per unit and ignore income taxes

O, and average cost


e made this year:

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