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Group Accounting: Andre Trifanni, Dedi Sumardi, Erlin Octavia, Hendry Syaputra

Answer no
3

Case 6-3

Sales

Original Report
Morgan Manufacturing
Westwood
2009
2010
2009
2010
$
1,500 $
2,000 $
1,500 $
2,000

Morgan on FIFO
Method
2010
$
2,000

Cost Of Goods Sold


Gross Margin
Selling, General & Administrative Expenses
Income Before Taxes
Income Tax Expenses
Net Income

$
$
$
$
$
$

810
690
450
240
96
144

Cash
Accounts Receivable

$
$

100 $
250 $

Inventory
Plant, Property & Equipment (Net)
Total Assets

$
$
$

Current Liabilities
Long Term Liabilities
Common Stock
Retained Earnings
Total Liabilities and Owner's Equity
LIFO reserve

Income Statement for the year ended Dec 31 (in


US$ Mio)

$
$
$
$
$
$

1,110
890
600
290
116
174

$
$
$
$
$
$

800
700
450
250
100
150

1,040

$
$
$
$
$
$

1,100
900
600
300
120
180

$
$
$
$
$

960
600
360
116
244

140 $
350 $

100 $
250 $

140
350

$
$

140
350

120 $
1,385 $
1,855 $

100 $
1,580 $
2,170 $

140 $
1,385 $
1,875 $

170
1,580
2,240

$
$

1,580
2,240

$
$
$
$
$

250
500
400
705
1,855

$
$
$
$
$

325
675
400
770
2,170

250
500
400
725
1,875

330
675
400
835
2,240

$
$
$
$
$

325
675
400
770
2,170

10

70

70

Balance Sheet, as of Dec 31 (in US$ Mio)

Gross Margin
Answer no
Pretax Return on Sales
1
Pretax Return on Assets

46.0%
16.0%
12.9%

$
$
$
$
$

44.5%
14.5%
13.4%

46.7%
16.7%
13.3%

$
$
$
$
$

45.0%
15.0%
13.4%

Answer no 2: Account affected by different inventory method: Cost of Goods Sold & Inventory.

Answer no 4: Morgan Performance is better than Westwood with condition, if using similar inventory method with Westwood:
- Gross Margin Morgan higgher than Westwood (48% vs 45%)
- Pretax Return on Sales Morgan higgher than Westwood (18% vs 15%)
- Gross Margin Morgan higher than Westwood (48% vs 45%)

170

48.0%
18.0%
16.1%