The Following 3 Ratios Have Been Computed Using the Financial

question 25

Essay

The following 3 ratios have been computed using the financial statements for the year ended December 31, 2011, for Arthur Company:

The following additional information has been assembled:

Show how the values for the 3 ratios computed above differ if Arthur had used FIFO, depreciated the asset over 8 years, and recognized only 5% of its environmental cleanup obligation. Compute how the financial statements would differ if the alternative accounting methods had been used. Do not treat the use of these alternative methods as accounting changes. Ignore any income tax effects.

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