12-3. Analyzing a company's future plant expansion based on its costing methods. The board of directors of the Williams Corporation is considering the possibility of a plant expansion. After some research and a review of the company's materials costing methods, the president presents the controller with the proposition of using the lifo method instead of the present fifo method because of its apparent tax advantages. A reduction of the company's income tax liability might provide additional capital for the planned expansion. The presider.t requests the controller to study the proposal further. The controller's analysis regarding the inventory is based on these transactions for June: June 1. Beginning balance: 200 units @ $3.00 per unit. 2. Purchased 500 units @ $3.20 per unit. 7. Issued 400 units. 11. Purchased 300 units @ $3.30 per unit. 14. Issued 400 units. 17. Purchased 400 units @ $3.20 per unit. 21. Issued 200 units. 24. Purchased 300 units @ $3.40 per unit. 26. Purchased 400 units @ $3.50 per unit. 29. Issued 600 units.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Perpetual inventory costing is used.
Sales were 1,600 units @ $7 per unit: marketing and ad ministrative expenses totaled $2,100.
Required:
(1) Comparative income statements based on the transactions for June, using the lifo and fifo
methods and a 50% income tax rate.
(2) The cash position of the Williams Corporation at the end of June, assuming that all trans-
actions, purchases, sales, and nonmanufacturing expenses were paid in cash.
Transcribed Image Text:Perpetual inventory costing is used. Sales were 1,600 units @ $7 per unit: marketing and ad ministrative expenses totaled $2,100. Required: (1) Comparative income statements based on the transactions for June, using the lifo and fifo methods and a 50% income tax rate. (2) The cash position of the Williams Corporation at the end of June, assuming that all trans- actions, purchases, sales, and nonmanufacturing expenses were paid in cash.
12-3. Analyzing a company's future plant expansion based on its costing methods. The board of
directors of the Williams Corporation is considering the possibility of a plant expansion. After
some research and a review of the company's materials costing methods, the president presents
the controller with the proposition of using the lifo method instead of the present fifo method
because of its apparent tax advantages. A reduction of the company's income tax liability might
provide additional capital for the planned expansion. The presidert requests the controller to
study the proposal further. The controller's analysis regarding the inventory is based on these
transactions for June:
June 1. Beginning balance: 200 units @ $3.00 per unit.
2. Purchased 500 units @ $3.20 per unit.
7. Issued 400 units.
11. Purchased 300 units @ $3.30 per unit.
14. Issued 400 units.
17. Purchased 400 units @ $3.20 per unit.
21. Issued 200 units.
24. Purchased 300 units @ $3.40 per unit.
26. Purchased 400 units @ $3.50 per unit.
29. Issued 600 units.
Transcribed Image Text:12-3. Analyzing a company's future plant expansion based on its costing methods. The board of directors of the Williams Corporation is considering the possibility of a plant expansion. After some research and a review of the company's materials costing methods, the president presents the controller with the proposition of using the lifo method instead of the present fifo method because of its apparent tax advantages. A reduction of the company's income tax liability might provide additional capital for the planned expansion. The presidert requests the controller to study the proposal further. The controller's analysis regarding the inventory is based on these transactions for June: June 1. Beginning balance: 200 units @ $3.00 per unit. 2. Purchased 500 units @ $3.20 per unit. 7. Issued 400 units. 11. Purchased 300 units @ $3.30 per unit. 14. Issued 400 units. 17. Purchased 400 units @ $3.20 per unit. 21. Issued 200 units. 24. Purchased 300 units @ $3.40 per unit. 26. Purchased 400 units @ $3.50 per unit. 29. Issued 600 units.
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