Laura Badora Company has been using LIFO inventory. The company is required to disclose th
Laura Badora Company has been using LIFO inventory. The company is required to disclose the replacement cost of its inventory and the replacement cost of its cost of goods sold on it annuals statements. Selected data for the year ended 2011 are as follows:
Ending accounts receivable, less allowance for doubtful accounts of $25,000 $ 480,000
Ending inventory, LIFO (estimates replacement $900,00) 570,000
Net Sale 3,650,000
Cost of goods sold (estimated replacement cost $3,150,000) 2,850,000
a. Compute the days’ sales receivable
b. Compute the days’ sales inventory, using the cost figure
c. Compute the days’ sales inventory, using the replacement cost for the inventory and the cost of goods sold.
d. Should replacement cost of inventory and cost of goods sold be used, when possible, when computing days’ sales in inventory? Discuss.