ch8hw - Matthew Wong Ch 3 Hw MGMT 161 Section 1 Professor...

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Matthew Wong MGMT 161 Section 1 Ch 3 Hw Professor Mastrolia Exercise 8.12 a. 1. If inventories is higher, CGS is lower, Gross Profit is higher, gross profit rate is higher 2. gross profit is higher, taxes higher?, therefore net income is unaffected or ignoring taxes, higher because gross profit is higher 3. inventories is higher, assets is higher, therefore higher 4. rate = lower. Days = higher 5. unaffected; doesn’t affect accounts receivable 6. unaffected; doesn’t affect cash 7. unaffected; doesn’t affect cash b. 1. more liquid, because current ratio is higher 2. more well off, because the company reported a higher gross profit. Problem 8.2A a. 1. CGS = 20,100 (4 at 5025 ea.) and ending inventory = 20,100 (4 at 5025 ea.) 2. CGS = 19,900 (2 at 4950 ea. And 2 at 5,000 ea.) and ending inventory = 20,300 (3 at 5100 and 1 at 5,000) 3. CGS = 20,300 (3 at 5100 and 1 at 5,000) and ending inventory = 19,900 (2 at 4950 ea. And 2 at 5,000 ea.) b. 1. ignoring income taxes, FIFO will result in the highest net income. This happens whenever there are increasing per unit costs 2. LIFO will result in lower income taxes.
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