Below Are Selected Numbers Extracted from Harnischfeger's Year X2 Financial

question 54

Short Answer

Below are selected numbers extracted from Harnischfeger's Year X2 financial statements (numbers are in thousands). $\begin{array}{|l|c|c|}\hline & \underline{X 2} & \underline{X 1} \\\hline \text { Sales } & \$ 2,887,570 & \$ 2,184,287 \\\hline \text { COGS } & \$ 2,166,775 & \$ 1,671,932 \\\hline \text { Current Assets } & \$ 1,410,250 & \$ 1,213,390 \\\hline \text { Current Liabilities } & \$ 1,077,127 & \$ 723,303 \\\hline\end{array}$

Harnischfeger's Footnote on inventories is as follows (numbers in thousands):
Inventories at October 31 consisted of the following:

$\begin{array}{|l|c|c|}\hline \text { Finished Goods } & \$ 198,160 & \$ 211,555 \\\hline \begin{array}{l}\text { Work in Process and } \\\text { purchased parts }\end{array} & 278,671 & 170,027 \\\hline \text { Raw Materials } & \underline{134,448} & \underline{6106,999} \\\hline &611,279&488,581\\\hline \begin{array}{l}\text { Less excess of } \\\text { current cost over } \\\text { stated LIFO value }\end{array} & \underline{(64,164)} & \mathbf{( 7 2 . 1 8 6 , 5 8 1} \\\hline & \$ 547,115 & \$ 416,395 \\\hline\end{array}$

Inventories valued using the LIFO method represented approximately 56% and 80% of consolidated inventories at October 31, X2 and X1, respectively.
a. Calculate for Year X2:
i) the gross margin percentage
ii) the current ratio
iii) inventory turnover
iv) Estimate the following numbers if Harnischfeger used FIFO for all inventories:
v) the gross margin
vi) the current ratio
vii) nventory turnover
b. Compare your answers in part a) and b) and comment.

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Definitions:

Tax Revenues

The income that is gained by governments through taxation, which is used to fund public services, government obligations, and goods.

Benefits Principle

A concept that suggests taxes should be levied based on the benefits received by taxpayers, ensuring that those who benefit more from public services pay more taxes.

Ability-To-Pay Principle

The ability-to-pay principle is a tax theory suggesting that taxes should be levied based on the taxpayer’s capacity to pay, implying that wealthier individuals should pay more in taxes.

Gasoline Tax

A tax imposed on the sale of gasoline, often used by governments to raise revenue and discourage excessive fuel consumption.