Page 718 - Accounting Principles (A Business Perspective)

This book is licensed under a Creative Commons Attribution 3.0 License

d. Number of days' sales in accounts receivable (assume 365 days in 2000).
e. EPS of common stock (ignore treasury stock).
f. Times interest earned ratio.

g. Equity ratio.
h. Net income to net sales.
i. Total assets turnover.
j. Acid-test ratio.
Problem H Cooper Company currently uses the FIFO method to account for its inventory but is considering a
switch to LIFO before the books are closed for the year. Selected data for the year are:
Merchandise inventory, January 1 $1,430,000
Current assets 3,603,600
Total assets (operating) 5,720,000
Cost of goods sold (FIFO) 2,230,800
Merchandise inventory, December 1,544,400
31 (LIFO)
Merchandise inventory, December 1,887,600
31 (FIFO)
Current liabilities 1,144,000
Net sales 3,832,400
Operating expenses 915,200
a. Compute the current ratio, inventory turnover ratio, and rate of return on operating assets assuming the

company continues using FIFO.
b. Repeat part (a) assuming the company adjusts its accounts to the LIFO inventory method.
Alternate problems
Alternate problem A Steel Corporation's comparative statements of income and retained earnings and
consolidated balance sheet for 2010 and 2009 follow:
Steel Corporation
Consolidated statement of Earnings
For the years ended 2010 December 31, 2009
(USD thousands)
December31
(1) (2)
2010 2009
Net sales $4,876.5 $4,819.4
Costs and expenses:
Cost of sales $4,202.8 $4,287.3
Depreciation 284.0 261.1
Estimated restructuring losses 111.8 137.4
Total costs $4,598.6 $4,685.8
Income from operations $268.9 $ 133.6
Financing income (expense):
Interest and other income 7.7 7.1
Interest and other financing costs (60.0) (46.2)
Loss before income taxes and cumulative $ 216.6 $ 94.5
effect of changes in accounting
Benefit (provision) for income taxes (37.0) (14.0)
Net earning (loss) $ 179.6 $ 80.5
Retained earnings, January 1 (859.4) (939.9)
$ (679.8) $ (859.4)
Dividends 0.0 0.0
Retained earnings, December 31 $ (679.8) (859.4)
Steel Corporation
Consolidated balance sheet
As of 2010 December 31, and 2009
December 31
(1) (2)
2010 2009

Accounting Principles: A Business Perspective 719 A Global Text