Questions by kobe08 - Page 24
" I am having trouble to answer part D, I've got A, B, and C "Analyzing Effects of LIFO on Inventory Turnover Ratios The current assets of Exxon Mobil Corporation follow: $ millions Year 3 Year 2 Current assets Cash and cash equivalents $3,177 $3,657 Notes and accounts receivable, less estimated doubtful amounts 25,597 21,394 Inventories: Crude oil, products and merchandise 12,871 10,877 Materials and supplies 4,121 4,203 Other current assets 1,368 1,285 Total current assets $47,134 $41,416 In addition, the following note was provided in its Year 3 10-K report:Analyzing Effects of LIFO on Inventory Turnover RatiosThe current assets of Exxon Mobil Corporation follow:$ millionsYear 3Year 2Current assetsCash and cash equivalents$3,177$3,657Notes and accounts receivable, less estimated doubtful amounts25,59721,394Inventories:Crude oil, products and merchandise12,87110,877Materials and supplies4,1214,203Other current assets1,3681,285Total current assets $47,134$41,416In addition, the following note was provided in its Year 3 10-K report:Inventories. Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out methodLIFO). Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred in bringing the inventory to its existing condition and location. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory cost. Inventories of materials and supplies are valued at cost or less.In Year 3, Year 2, and Year 1, net income included losses of $10 million, $295 million and $186 million, respectively, attributable to the combined effects of LIFO inventory accumulations and drawdowns. The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values by $10.8 billion and $8.1 billion at December 31, Year 3 and Year 2 respectively.Required:a. Exxon Mobil reported pretax earnings of $18,674 million in Year 3. What amount of pretax earnings would have been reported by the company if inventory had been reported using the FIFO costing method?$Answermillionb. Exxon Mobil reported cost of goods sold of $128,217 million in Year 3. Compute its inventory turnover ratio for Year 3 using total inventories.(Round your answer to one decimal place.)Answerc. BP, p.l.c. (BP) reports its financial information using IFRS. For fiscal Year 3, BP reported cost of goods sold of $179,716 million, beginning inventory of $17,655 million and ending inventory of $19,011 million. Compute BPs inventory turnover ratio for fiscal Year 3. (Round your answer to one decimal place.)Answerd. Compare your answers in parts b and c. BP cant use LIFO to report under IFRS, so, revise your calculations in such a way as to find out which company has faster inventory turnover. (Hint: Calculate Exxon Mobil's inventory turnover ratio as if Exxon Mobil used the FIFO costing method.) (Round your answer to one decimal place.)
Jackson Corporation acquired equipment on January 1, 2010, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2013, Jackson Corporation revised the total useful life of the equipment to 8 years and the estimated salvage value to be $20,000. Compute depreciation expense for the year ending December 31, 2013, if Jackson Corporation uses straight-line depreciation.A)$42,300B)$26,477C)$39,300D)$46,300E)None of the above.Apparently the answer is A, but I keep getting $46,300. Someone please explain how to get A, $42300.