: Babu G. Baradwaj
May 11, 2009
Principles of Financial Management
Revised IM # 02
Questions and Problems
Given the following information about the Elkridge Sporting Goods,
Inc., construct a balance sheet for the period ending June 30, 2008. The firm had cash and
marketable securities of $25,135, accounts receivables of $43,758, inventory of
$167,112, net fixed assets of $325,422, and other assets of $13,125. It had accounts
payables of $67,855, notes payables of $36,454, long-term debt of $223,125, and
common stock of $150,000. How much retained earnings does the firm have?
Total Current Assets
Total Current Liabilities
Net Fixed Assets
Long Term Debt
TOTAL LIABILITIES &
Differentiate between FIFO and LIFO.
FIFO (first in, first out) refers to the practice of firms, when making sales, assuming that the
inventory that came in first (at a lower price) being sold first. LIFO (last in, last out) implies that
a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on
the balance sheet.
Explain how the choice of FIFO versus LIFO can affect a firm’s
balance sheet and income statement.
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