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Answer no
3
Case 6-3
Sales
Original Report
Morgan Manufacturing
Westwood
2009
2010
2009
2010
$
1,500 $
2,000 $
1,500 $
2,000
Morgan on FIFO
Method
2010
$
2,000
$
$
$
$
$
$
810
690
450
240
96
144
Cash
Accounts Receivable
$
$
100 $
250 $
Inventory
Plant, Property & Equipment (Net)
Total Assets
$
$
$
Current Liabilities
Long Term Liabilities
Common Stock
Retained Earnings
Total Liabilities and Owner's Equity
LIFO reserve
$
$
$
$
$
$
1,110
890
600
290
116
174
$
$
$
$
$
$
800
700
450
250
100
150
1,040
$
$
$
$
$
$
1,100
900
600
300
120
180
$
$
$
$
$
960
600
360
116
244
140 $
350 $
100 $
250 $
140
350
$
$
140
350
120 $
1,385 $
1,855 $
100 $
1,580 $
2,170 $
140 $
1,385 $
1,875 $
170
1,580
2,240
$
$
1,580
2,240
$
$
$
$
$
250
500
400
705
1,855
$
$
$
$
$
325
675
400
770
2,170
250
500
400
725
1,875
330
675
400
835
2,240
$
$
$
$
$
325
675
400
770
2,170
10
70
70
Gross Margin
Answer no
Pretax Return on Sales
1
Pretax Return on Assets
46.0%
16.0%
12.9%
$
$
$
$
$
44.5%
14.5%
13.4%
46.7%
16.7%
13.3%
$
$
$
$
$
45.0%
15.0%
13.4%
Answer no 2: Account affected by different inventory method: Cost of Goods Sold & Inventory.
Answer no 4: Morgan Performance is better than Westwood with condition, if using similar inventory method with Westwood:
- Gross Margin Morgan higgher than Westwood (48% vs 45%)
- Pretax Return on Sales Morgan higgher than Westwood (18% vs 15%)
- Gross Margin Morgan higher than Westwood (48% vs 45%)
170
48.0%
18.0%
16.1%