Question

The following accounting information pertains to Boardwalk Taffy and Beach Sweets. The only difference between the two companies is that Boardwalk Taffy uses FIFO, while Beach Sweets uses LIFO.

	Boardwalk Taffy					Beach Sweets
Cash		$	70,000				$	70,000
Accounts receivable			330,000					330,000
Merchandise inventory			235,000					210,000
Accounts payable			250,000					250,000
Cost of goods sold			1,245,500					1,407,000
Building			300,000					300,000
Sales			2,100,000					2,100,000

Required
a-1. Compute the gross margin percentage for each company.
a-2. Identify the company that appears to be charging the higher prices in relation to its cost.
b-1. For each company, compute the inventory turnover ratio and the average days to sell inventory.
b-2. Identify the company that appears to be incurring the higher financing cost.

Answer 1