Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 42

Analyzing and Interpreting the Effects of the LIFO/FIFO Choice on Inventory Turnover Ratio
Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Required:
1. Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.
2. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods (show computations).
3. Based on your answer to 2, explain whether analysts should consider the inventory costing method when comparing companies' inventory turnover ratios.