Question

The Wheat Company has used the LIFO method for inventory valuation since the start of business 15 years ago. The current year ending inventory is $375,000. If the FIFO method of inventory had been used, the inventory would be $450,000. If Wheat Company had used the FIFO inventory method, income before income taxes would have been 6 P Flag question Select one 0 A, $75,000 higher over the 15 year period B. $75.000 lower over the 15 year period. c. $75,000 higher in the current year. 0 . D. S75000 lower in the current year. Question 28 Other things held constant, which of the following will NOT affect the current ratio, assuming an initial Not yet current ratio greater than 1.0? Select one: O A. Fixed assets are sold for cash Points out of 5.00 Flag question B. Long-term debt is issued to pay off current liabilities C. Accounts recelvable are collected in cash D. Cash is used to pay off accounts payable is book Question 29 General information applicable to Phoenix Company is provided below.

Answer 1

If Wheat Company had used the FIFO inventory method, income before income taxes would have been?

• A) $75,000 higher over the 15 year period

Income would have been higher since cost of goods sold would have been lower. Net income = total revenue - total costs (COGS are included here)

Question 28: Other things held constant, which of the following will NOT affect the current ratio, assuming an initial Not yet current ratio greater than 1.0?

• C) Accounts receivable are collected in cash

Current ratio = current assets / current liabilities

Since cash and accounts receivable are both current assets, it doesn't matter if sales increase cash or accounts receivable.

Answer 2

Explanation:

Question 27

If Wheat Company had used the FIFO inventory method, income before income taxes would have been $75,000 higher in the current year. As inventory is an asset to the company. Therefore the $75,000 in inventory would have increased the company's asset and increasing the income before taxes.

Question 28

Other things held constant, which of the following will NOT affect the current ratio, assuming an initial Not yet current ratio greater than 1.0?

C. Accounts receivable are collected in cash.

Current ratio measures a company's ability to pay short-term obligations as at when due. It indicates that a company can manage its debts and other payable when their current assets is well managed.

It is calculated as Current Asset/ Current Liability. A ratio of 1 and above is the best meaning that a company an manage its debts obligations well.