In the Following Information from the Year 2 Balance Sheet

question 117

Essay

In the following information from the Year 2 balance sheet of Kayla Enterprises,all amounts have been rounded to millions of dollars.
$\begin{array}{lrr}& \underline{\text { May 31, Year } 2} & \underline{\text { May 31, Year } 1}\\\text { Raw materials } & \$ 25.8 & \$ 52.1 \\\text { Work-in-process } & 44.8 & 34.7 \\\text { Finished goods } & 1,132.70 & 1,303.8 \\\text { Inventories at FIFO } & 1,203.30 & 1,390.6 \\\text { Adiustment to LIFO } & 5.6 & 21.9\end{array}$
Answer the following questions:
A) Describe what costs are included in each of the three types of inventones listed for Kayla Enterprises.

B) Even though a footnOte describing the inventory costing method(s) used by the company is not provided here, what can you conclude about the inventory costing methods(s) used by the company?

C) Explain what the amount "Adjustment to LIFO" represents. What effect does this adjustment have on the company's net earnings in Year 1 and Year 2?

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Definitions:

Statement of Cash Flows

A financial report detailing how variations in income and balance sheet accounts influence cash and cash equivalents, segmented into operating, investing, and financing activities.

Interest Paid

The amount of money paid by a borrower to a lender in return for the use of borrowed funds, calculated as a percentage of the loan amount.

Dividends Paid

Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Cost of Sales

Direct costs attributable to the production of the goods sold by a company, including material and labor costs.