Read the following questions. On a separate piece of paper, write the best possible answer for each one. The beginning-of-the-month and end-of-the month inventories are indicated by the abbreviations _____ and _____.

In 2021, J J Dishes changed its method of valuing inventory from the FIFO method to the LIFO method. At December 31, 2020, J J’s inventories were $96 million (FIFO). J J’s records were insufficient to determine what inventories would have totaled if determined on a LIFO cost basis. Briefly describe the steps J J should take to report the change.

The following data were extracted from the income statement of Saleh Inc.:

$$\begin{array}{l} &\textbf{Current Year}&\textbf{Preceding Year}\\ \hline \text{Sales}&\text{\$12,750,000}&\text{\$13,284,000}\\ \text{Beginning inventories}&\text{840,000 }&\text{800,000}\\ \text{Cost of goods sold}&\text{6,375,000 }&\text{7,380,000}\\ \text{Ending inventories}&\text{860,000 }&\text{840,000}\\ \end{array}$$

b. What conclusions can be drawn from these data concerning the inventories?

Indicate whether each item would be added ( ) or subtracted ( ) in the computation of cash fl ow from operating activities using the indirect method.

1. Depreciation.
2. Inventories decrease.
3. Accounts payable decrease.
4. Accounts receivable increase.
5. Accrued liabilities increase.

The following information is available for Chemco Inc’s inventories as of June 30, 2015:

$$\begin{array}{lrr} \hline \textbf{(in Thousands)}&\textbf{2015\hspace{9pt}}&\textbf{2014\hspace{9pt}}\\ \hline\\ \text{Finished goods}&\text{\$\hspace{5pt}382,925}&\text{\$\hspace{5pt}303,249}\\ \text{Work in process}&{\text{\hspace{15pt}76,524}}&{\text{\hspace{15pt}60,588}}\\ \text{Raw materials and supplies}\hspace{10pt}&\underline{\text{\hspace{15pt}72,246}}&\underline{\text{\hspace{15pt}49,844}}\\ \text{Inventories at current cost}&\text{\hspace{10pt}531,695}&{\text{\hspace{15pt}413,681}}\\ \text{Less LIFO valuation}&\underline{\text{\hspace{7pt}(83,829)}}&\underline{\text{\hspace{7pt}(88,368)}}\\ \text{Total inventories}&\text{\$\hspace{5pt}447,886}&{\text{\$\hspace{5pt}325,313}}\\ \\\hline \end{array}$$

We used the LIFO method of valuing our inventories for approximately 40% and 44% of total inventories at June 30, 2015 and 2014, respectively.

(a) What method of inventory is used for the other 60% and 56% of total inventories?

Is it possible to achieve zero inventories? Why or why not?

In 2016, J J Dishes changed its method of valuing inventory from the FIFO method to the LIFO method. At December 31, 2015, J J’s inventories were $96 million (FIFO). J J’s records were insufficient to determine what inventories would have totaled if determined on a LIFO cost basis. Briefly describe the steps J J should take to report the change.

Read the following questions. On a separate piece of paper, write the best possible answer for each one. Product depth refers to the number of different product lines a business manufactures or sells. T F

Is it possible to achieve zero inventories? Why or why not

Identify three items that are likely to be held as inventories by these businesses.

The following data were extracted from the income statement of Saleh Inc.:

$$\begin{array}{lrr} & \text { Current Year } & \text { Preceding Year } \\ \hline \text { Sales } & \$ 12,750,000 & \$ 13,284,000 \\ \text { Beginning inventories } & 840,000 & 800,000 \\ \text { Cost of goods sold } & 6,375,000 & 7,380,000 \\ \text { Ending inventories } & 860,000 & 840,000 \end{array}$$

b. What conclusions can be drawn from these data concerning the inventories?

C. Z. is a 37-year-old woman who was diagnosed with rheumatoid arthritis 3 years ago. Her current medications include naproxen $500 \mathrm{mg}$ twice daily, methotrexate $20 \mathrm{mg}$ once weekly, and folic acid $1 \mathrm{mg}$ daily. She says she has improved on this plan but has persistent joint pain and swelling in her hands and feet, with some lingering fatigue. She came to the clinic today because her family recently moved to the area and she needs to establish a relationship with a new primary care provider. She is married with 2 school-aged children and was just hired part-time as a cashier at a local department store.

C.Z. says her symptoms started suddenly. She stated, "she woke up one morning and was so weak she could barely get out of bed or walk." Over the next few days, she started to hurt and feel stiff all over, making it hard to sit, stand, or lay down without pain. She lost her appetite and noticed some hair loss. After having lab testing, the previous provider told her she had RA and started her on her current medications. Recent $x$-rays showed some bone erosion in her right wrist and 3 metacarpophalangeal (MCP) joints of her right hand. She denies any family history of RA or other autoimmune disorders and has had no hospitalizations except for childbirth.

C.Z.'s physical assessment was unremarkable except that her left and right index and middle PIP joints were slightly tender and swollen with limited range of motion. Her vital signs were $120 / 78,74,16,98.2^{\circ} \mathrm{F}$ $\left(36.8^{\circ} \mathrm{C}\right)$. Her height is $5 \mathrm{ft}, 5 \mathrm{in}(165 \mathrm{~cm})$, and she weighs $170 \mathrm{lbs}(77 \mathrm{~kg})$.

Laboratory Results:

$$\begin{array}{ll}\text { C-reactive protein (CRP) } & 2.7 \mathrm{mg} / \mathrm{dL}(25.7 \mathrm{nmol} / \mathrm{L} \text { ] [normal: }<1.0 \mathrm{mg} / \mathrm{dL} \\ & [<9.5 \mathrm{nmol} / \mathrm{L}]) \\ \text { Erythrocyte sedimentation rate (ESR) } & 38 \mathrm{~mm} / \mathrm{hr} \text { (normal: } 0-20 \mathrm{~mm} / \mathrm{hr} \text { ) } \\ \text { Rheumatoid factor (RF) } & 344 \quad \text { (negative or titer }<1: 17) \\ \text { ANA } & 26 \mathrm{mmol} / \mathrm{L} \text { (negative at } 1: 40 \text { dilution) }\end{array}$$

You ask C.Z. how having RA has affected her life. She states that she used to be a very active person, but now she must be careful about how much she does each day because she has noted that too much activity triggers increased fatigue and pain. After teaching C.Z. to use heat and cold therapy to relieve symptoms, you determine teaching has been effective when she states:

a. "Taking a warm shower can help ease morning stiffness." b. "Cold therapy can be applied for 30 minutes to relieve joint stiffness." c. "I can use heat therapy for 20 minutes to relieve the symptoms of an acute flare." d. "When my joints are swollen, a heating pad for 10 to 15 minutes can relieve the pain."

What are inventories? Why are they important to manufacturing companies?

The following chart shows total January retail inventories in the United States in 2000, 2005, and 2007 (t=0 represents 2000):

$$\begin{matrix} \text{Year t} & \text{0} & \text{5} & \text{7}\\ \text{Inventory (\$ billion)} & \text{380} & \text{450} & \text{480}\\ \end{matrix}$$

Find the regression line (round coefficients to two decimal places) and use it to estimate January retail inventories in 2004.