Q18. Footnote disclosures:

§      One of Lowe’s major customers, who accounts for $500 in receivables, has just filed bankruptcy.

§      Inventories are valued at cost as determined by last in, first out (LIFO) method. The LIFO reserve is $300.

§      Additional operating facilities and equipment are financed with operating leases that have a present value of $1,000.

§      Intangible assets represent $3,000 of goodwill from previous acquisitions.

§      Due to a decrease in interest rates, long-term debt has a current market value of $600.

§      The current market price of Lowe’s preferred stock is $2/share.

§      Lowe’s is expected to incur expenses with a present value of $300 to remedy an environmental problem at one of its sites.

Lowe's total long-term obligations on the adjusted balance sheet total which of the following?

A)   $1,800.

B)   $1,900.

C)   $2,100.

Q19. What is Lowe's ratio of long-term debt to equity based on the historical cost balance sheet?

A)   0.03.

B)   0.30.

C)   0.06.

Q20. What is Lowe's adjusted inventory based on the first in, first out (FIFO) method?

A)   $1,200.

B)   $1,800.

C)   $300.

Q21. Which of the following statements is correct when inventory prices are falling?

A)     LIFO results in higher COGS, lower earnings, higher taxes, and higher cash flows.

B)     LIFO results in lower COGS, lower earnings, lower taxes, and higher cash flows.

C)     LIFO results in lower COGS, higher earnings, higher taxes, and lower cash flows.