Financial Statement Analysis Cases
Case: Prab Robots, Inc.
Prab Robots, Inc., reported the following information regarding 2011–2012 inventory.
Prab Robots, Inc.
2012
2011
Current assets
Cash
$153,010
$538,489
Accounts receivable, net of allowance for doubtful accounts of $46,000 in 2012 and $160,000 in 2011
1,627,980
2,596,291
Inventories (Note 2)
1,340,494
1,734,873
Other current assets
123,388
90,592
Assets of discontinued operations
—
32,815
Total current assets
3,244,872
4,993,060
Instructions
(a) Why might Prab Robots, Inc., use two different methods for valuing inventory?
(b) Comment on why Prab Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO.
(c) Why does the LIFO liquidation reduce operating costs?
(d) Comment on whether Prab would report more or less income if it had been on a FIFO basis for all its inventory.