What might have caused caterpillars lifo reserve

Assignment Help Accounting Basics
Reference no: EM13122598

Ford Motor (automotive) AND Caterillar (heavy equipment) both use the LIFO inventory valuation method. Caterpillar uses it for 70% of its inventories and Ford for 28% of its inventories. Data from the 2009 10-K filings of these two companies follow (in millions of U.S. dollars):

Ford Caterillar

Cost of goods sold... 100,016 23,886
LIFO inventory, beginning 6988 8,781
LIFO inventory, ending 5450 6,360
LIFO reserve, beginning 850 3,183
LIFO reserve, ending 798 3,003

1. For both companies, as of the end of 2009, the existence of a LIFO reserve demonstrates that LIFO inventory is less than it would have been if FIFO had been used. For both companies, compute the ratio of LIFO inventory/FIFO inventory for 2009 ending inventory. Comment on the resulting numbers.

2. For Caterpillar, compute what 2009 cost of goods sold would have been if FIFO had been used.

3. What might have caused Caterpillar's LIFO reserve to be so much larger than Ford's?

4. If a company uses FIFO, can you use financial statement data to compute what its cost of goods sold would be using LIFO? Explain.

Reference no: EM13122598

Questions Cloud

Tax-exempt interest income : In addition, Otter has tax-exempt interest income of $250,000 and makes distributions to Ellie and Linda of $50,000 each. Discuss the impact of this information on the taxable income of Otter, Ellie, and Linda if Otter is:
What are the similarities and differences in these two goals : a finance professor and a marketing professor were recently comparing notes on their perceptions of corporations. The finance professor claimed that the goal of corporation should be to maximize the valur to the shareholders. The marketing profess..
Problem related to long-term capital loss : Emu Company, which was formed in 2010, had operating income of $200,000 and operating expenses of $120,000 in 2010. In addition, Emu had a long-term capital loss of $10,000.
Relative extrema of a function : G(x) = 3x^5 - 5x^4 What is the relative extreme point of g. Please explain why.
What might have caused caterpillars lifo reserve : For both companies, as of the end of 2009, the existence of a LIFO reserve demonstrates that LIFO inventory is less than it would have been if FIFO had been used. For both companies, compute the ratio of LIFO inventory/FIFO inventory for 2009 endi..
Determining inverse hyperbolic function : Solve the equations i. 6sinh theta - 4cosh theta-3=0 correct to 3 decimal places
Identifying the tax issues : Orange has a $20,000 charitable contribution carryover to 2010 from a prior year. Identify the tax issues the board should consider regarding the proposed contribution.
Explain how a sale would be generally treated : If economic depreciation refers to diminution in value because of obsolescence, physical wear and tear, technological advances in substitute goods, or changes in consumption behavior.
Determining continuity of a graph : Determine if the given function can be extended to a continuous function at x=0. If so, approximate the extended function's value at x=0 (rounded to four decimal places if necessary).

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Investment trust fund-summarize the collection of interest

Demostrate the entry in the Investment Trust Fund to summarize the collection of interest for six-month period.

  Determining tests of controls

What do you do if you are unable to determine internal controls? Which do you think is most important?

  Determining predetermined overhead-overhead applied

Snapper Corp. computes its predetermined overhead rate annually on the basis of direct-labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $240,000 and the total direct labor hours (dlh) would be 6..

  Assist management in computing possible damages

What accounting and other information could you look at to assist management in computing possible damages?

  Computing desired amonut of investment

How much should she invest in the money market account each year for the next 8 years to achieve her objective? How much would she need as a lump sum payment to compound to $20,000 in 8 years at 6.35% annual rate?

  Depreciation rule-profit margin of business

Is Choi's ruling an ethical violation, or is it a legitimate decision in computing depreciation? How will Choi's new depreciation rule affect the profit margin of her business?

  What is the owners equity balance

A company's retained earnings on December 31, 2011 was $2,190,000 and its shareholders equity was $8,760,000.

  Depreciation-the use of real estate

Since tax-exempt organizations do not benefit from the deductions that result from depreciation, what options do tax-exempt organizations have in acquiring the use of real estate?

  Mortgage note records

Prepare the journal entry to record the retirement of the bonds at maturity, assuming the bonds were issued at 100. Prepare the journal entry to record the retirement of the bonds before maturity at 98. Assume the balance in premium on bonds payable ..

  Record the bond pruchase on august 1, 2010

On August 1, 2010, Dambro Co acquired 200, $1,000, 9% bonds at 97 plus accrued interest. The bonds will be added to Dambro's available for sale portfolio. The bonds were dated May 1, 2010, and mature on April 30, 2016, with interest paid each October..

  Business accounting for manufacturing company

Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in-process on December 31, 2011, consisted of one job (no. 2077), which was carried on the year-end balance sheet at $156,800. Determine ..

  Change in accounting method

At the beginning of 2011, Red decided to change the depreciation to the double-declining balance method. The residual value remains at $4 million. Ignoring income taxes, what will be Red's depreciation expense for 2011?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd