Problem:
I need help in understanding how to calculate the current ratio based on inventory as reported using LIFO and calculating the current ratio after adjusting for the LIFO reserve based on the information below.
(in millions) 2004
Beginning inventory $ 10,960
Ending inventory 11,717
LIFO reserve 1,442
Current assets 55,515
Current liabilities 74,892
Cost of goods sold 150,053
Sales $161,545
Turnover Ratio
COGS divided by Ending Inventory = Turnover Ratio
$150,053 / 11,717 = 12.81
Days in inventory
Number of days 365 in a year divided by turnover ratio = days in inventory.
365 / 12.81 = 28.5