comment on whether prab would report more or less income if it had been on a fifo ba 645835
Financial Statement Analysis Cases
Case: Prab Robots, Inc.
Prab Robots, Inc., reported the following information regarding 2011–2012 inventory.
|
Prab Robots, Inc. |
||
|
2012 |
2011 |
|
|
Current assets |
||
|
Cash |
$153,010 |
$538,489 |
|
Accounts receivable, net of allowance for doubtful accounts of $46,000 in 2012 and $160,000 in 2011 |
1,627,980 |
2,596,291 |
|
Inventories (Note 2) |
1,340,494 |
1,734,873 |
|
Other current assets |
123,388 |
90,592 |
|
Assets of discontinued operations |
— |
32,815 |
|
Total current assets |
3,244,872 |
4,993,060 |
Instructions
(a) Why might Prab Robots, Inc., use two different methods for valuing inventory?
(b) Comment on why Prab Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO.
(c) Why does the LIFO liquidation reduce operating costs?
(d) Comment on whether Prab would report more or less income if it had been on a FIFO basis for all its inventory.