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The recent financial statements of McLelland Clothing Inc. include the following data: |Particulars|Amount| |-|-:| Sales |$754,690 Cost of goods sold:$ $Computed under FIFO |528,600$ $Computed under LIFO |555,000 Average inventory:$ $Computed under FIFO| 72,200$ $Computed under LIFO |45,800 **Required:** 1. Calculate McLelland’s gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method. Be sure to explain what each ratio means. 2. Calculate McLelland’s gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the LIFO inventory costing method. Be sure to explain what each ratio means. 3. Which ratios—the ones computed using FIFO or LIFO inventory values—provide the better indicator of how successful McLelland was at managing and controlling its inventory?
Consider the following transactions for Garman Packing Supplies:
- Apr. 10 - Garman Packing Supplies buys $175,000 worth of merchandise inventory on account with credit terms of 1/10, n/30.
- 12 - Garman returns$15,200 of the merchandise to the vendor due to damage during shipment.
- 19 - Garman paid the amount due, less the return and discount.
- Journalize the purchase transactions assuming Garman Packing Supplies uses the periodic inventory system. Explanations are not required.
- What is the amount of net purchases?
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