A distiller raises whiskey manufacture and revenue diminishes owning to the accountingprocedures that are used. There are debates related to the handling of expenditures that could be categorized as either as production, inventory, or period costs. The required aging process gives way added queries about previous period reaffirmations and required funding. A redrafted account of a previous case.
Balance Sheet 1987- 1991
Income Statement 1987- 1991
Same Production and Increased Production
Free Cash Flows ( In thousands)
Present Value of Future Cash Flows
Intrinsic Value of the firm
1. Is Dobbins using LIFO or FIFO? Which should it use?
2. Please provide a uFCFF and Intrinsic Firm Value for Dobbins:
a. As if it had not increased production; and
b. Given its increases in production.
3. In your opinion, what costs should be included in Dobbins's inventory?
4. Assuming Dobbins decided to charge barrel costs (but not other warehousing and aging costs) to inventory, what 1988 income statement and balance sheet items would change, and what would the new amounts be?(Assume no change to in-process inventory)
5. If Dobbins's suggestion of including all warehousing and aging costs in inventory were accepted, how would the 1988 financial statements is affected? (Same assumption as for Question 2)
6. What method of accounting would you recommend that Dobbins use in preparing the annual financial statements to be submitted to Ridgeview National Bank?